Identifier
Created
Classification
Origin
07KUALALUMPUR575
2007-03-28 09:14:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kuala Lumpur
Cable title:  

PETRONAS ON CASPIAN GAS; PM ABDULLAH TO VISIT KABUL

Tags:  ECON ENRG PREL ECIN EPET MY TX 
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FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC PRIORITY 8865
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHTA/AMEMBASSY ALMATY PRIORITY 0039
RUEHAK/AMEMBASSY ANKARA PRIORITY 0087
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UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000575 

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SENSITIVE
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E.O. 12958: N/A
TAGS: ECON ENRG PREL ECIN EPET MY TX
SUBJECT: PETRONAS ON CASPIAN GAS; PM ABDULLAH TO VISIT KABUL

REF: ASHGABAT 309

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000575

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SENSITIVE
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E.O. 12958: N/A
TAGS: ECON ENRG PREL ECIN EPET MY TX
SUBJECT: PETRONAS ON CASPIAN GAS; PM ABDULLAH TO VISIT KABUL

REF: ASHGABAT 309


1. (U) Summary: Petronas, CEO Tan Sri Hassan Merican said
Malaysia,s national oil company has not yet decided on an
export route for Livanov gas and is willing to consider all
possible export routes for Caspian oil and gas, including a
westward one. In response to PDAS Mann's suggestion that gas
extracted from the Livanov field in the Caspian Sea could be
connected to an existing Azeri pipeline only 80 km away,
Merican agreed it could be a realistic option even though the
volume would be small. Petronas currently is considering its
long-term investments in the region and Merican expects key
decisions to be made by this summer. He acknowledged the
potential for new opportunities under Turkmenistan's new
President Berdymukhamedov, and he plans to travel to Ashgabat
next month. In a separate meeting, Husni Zai, MFA Under
Secretary for East and South Asian Affairs, told Mann that

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Prime Minister Abdullah Badawi would attend an upcoming
conference in Kabul on public-private partnerships for Afghan
reconstruction and development.


A new Caspian landscape
--------------


2. (U) The Ambassador, SCA PDAS Steve Mann, and econoff met
with Petronas CEO Tan Sri Hassan Merican March 22 to discuss
Caspian oil and gas. Petronas is a major player in
Turkmenistan with a 25-year production sharing agreement
signed in 1996 to develop the offshore Block 1 (Livanov) in
the Caspian Sea, and is looking at expanding its investments
in the country (reftel).


3. (U) PDAS Mann outlined three new developments affecting
Caspian gas production, including 1) increasing demand
coupled with decreasing indigenous production in Europe; 2)
tougher re-centralization efforts by Russia over the past
nine months including Gazprom targeting foreign upstream
investments as well as midstream; and 3) a new President of
Turkmenistan with a stated interest in working with
Azerbaijan -- possibly opening a new route for Caspian gas
that would compete with Russian monopoly Gazprom.



Development, not gas

--------------


4. (U) Mann explained that the U.S. was interested in
promoting Turkmenistan's energy diversification, which would
attract foreign investment and help foster a stable
investment climate and reliable export markets.
Turkmenistan's GDP dropped 90 per cent in 1997 due to a
dispute with Gazprom, he said. Mann pointed out that no
Turkmen gas was destined for U.S. markets; rather, the U.S
simply does not want Turkmenistan to become a failed state
but rather would like to see the country develop. He
described earlier U.S. successes as a catalyst and as a
neutral broker, offering support and technology to both sides
as with the BTC line, and offered to assist Petronas in
developing a diversity of export routes for Turkmen gas. He
requested a designated point of contact on Caspian energy
issues, and Merican agreed to designate a Petronas official
to act in that capacity.


5. (U) Merican acknowledged the changing landscape under the
new Turkmen President, and said Petronas had made no final
decision on gas transit issues in the region. He hoped to
meet President Berdymukhamedov next month and expected key
decisions to be made by this summer. He also pointed out
that Petronas simply sold the gas to the Turkmen government,
which must determine how to re-sell it, but that exporting
gas northward would require "new facilities." He observed
that Petronas has decided not to operate in Kazakhstan, after
many difficulties and delays in that country.


6. (U) After a discussion of existing pipeline capacities and
potential routes, Merican nodded thoughtfully to Mann's
observation that Petronas' Livanov field could link to
existing Azeri production pipelines only 80 km away,
responding, "not much volume, but not bad."


7. (U) Comment: We have been seeking a meeting with Petronas

KUALA LUMP 00000575 002 OF 002


officials since October, but to no avail until recently.
Post can only speculate why Merican agreed to meet at this
time, but it is possible that Gazprom,s heavy-handed actions
on Sakhalin II and other ways have piqued his interest in
alternative transportation routes. He also may have been
seeking insight into political developments in Turkmenistan
following the death of former-President Niyazov.


PM Abdullah to Visit Afghanistan
--------------


8. (SBU) In an earlier meeting at the Ministry of Foreign
Affairs, Mann expressed his appreciation for Malaysia's
support to Afghanistan and Sri Lanka. Husni Zai, Under
Secretary for East and South Asian Affairs, expressed a

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willingness to share Malaysia's experience and mentioned
assistance being provided through Mercy Corps Malaysia. He
said the Taliban were taking advantage of the people,
preventing reconstruction assistance from reaching the
public. Husni said last year Afghan FM Abdullah attended a
seminar in Malaysia on business opportunities, but that the
poor security situation in Afghanistan prevented any serious
business cooperation between the two countries. Lack of
security was the main factor hampering business cooperation,
he said.


9. (SBU) Husni said Prime Minister Abdullah Badawi would
attend an upcoming conference in Kabul on building public
private partnerships for Afghan reconstruction, but said much
preparation still needed to be done, especially since
Malaysia has no embassy there. Mann suggested that the
Malaysians contact the U.S. embassy in Kabul for logistical
information. We could not assist directly but would be
pleased to share our experience.



10. (U) Comment: Husni,s attitude suggested that Malaysia
was ready to consider stepping up its assistance, especially
where other Muslims were involved. He focused on Malaysia's
assistance to "Muslims caught in the middle" in Sri Lanka,
highlighting Malaysia's efforts to rebuild a Muslim community
there after the December 2004 tsunami. Encouraging Muslim
countries like Afghanistan to request assistance from
Malaysia directly could yield positive results.

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