TURKMENISTAN: HYDROCARBONS OFFICIALS RESTATE

C O N F I D E N T I A L ASHGABAT 001247 SIPDIS STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: DECL: 09/18/2018 TAGS: PGOV PREL ECON EPET TX SUBJECT: TURKMENISTAN: HYDROCARBONS OFFICIALS RESTATE NATIONAL PREFERENCE FOR ONSHORE WORK BY TURKMEN COMPANIES TO CHEVRON REF: A. ASHGABAT 1139 ¶B. ASHGABAT 1240 Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d). ¶1. (C) During a September 18 meeting with Charge, the AmCit country manager for Chevron's Turkmenistan office said a number of Turkmenistan hydrocarbons officials reiterated to him the national preference for Turkmen companies (TurkmenNeft and TurkmenGas) to do the onshore work. September 12-18, the Chevron country manager met with State Agency for Management and Use of Hydrocarbon Resources Director Yagshygeldi Kakayev, TurkmenGas head Baymurat Hojamuhammedov, Turkmen Geologiya head Sapargeldi Jumayev, and Acting Minister of Oil and Gas Industry Bayramgeldi Nedirov. All gave him the same message -- Turkmenistan wants control of production. Foreign companies are welcome to work offshore, be service providers, do gas processing, or work on infrastructure. Foreign companies cannot book reserves. ¶2. (C) The Chevron country manager asked Hojamuhammedov about the two letters the office received from Hojamuhammedov, when he was minister of oil and gas, in August, stating that Turkmenistan is ready to open negotiations on the company's proposal to work natural gas onshore (Ref A). Hojamuhammedov did not answer directly, but said now they can only talk about work offshore. Nedirov separately told the Chevron country manager that "it's the policy" (Ref B). Nedirov asserted that there can be no PSAs onshore. CNPC was the only exception because of the pipeline. (NOTE: According to Turkmen Geologiya head Jumayev, the Chinese have already drilled 12 wells and two have reached the subsalt. END NOTE.) Foreign companies could do services, including sulfur handling. ¶3. (C) When the Chevron country manager raised the fact that Turkmenistan lacked the technical capacity to work subsalt, Jumayev said that Turkmenistan's technical capability may not be as good as Chevron's but it is good enough. Jumayev claimed the Turkmen have some technical expertise, including the ability to do seismic work. When the Chevron country manager talked to State Agency Director Kakayev about the possibility of joint ventures, Kakayev referred to the unfortunate experience Turkmenistan had with Bridas. The AmCit tried to explain to Kakayev that not all companies are the same and pointed to Chevron's good working relationships with the countries of Angola, Nigeria, and Kazakhstan. ¶4. (C) The Chevron country manager said he is not giving up and believes the Turkmen are being very short-sighted by sticking to this policy. He holds out hope that they will rethink it. Nedirov said he was glad that Chevron had set up an office and hoped for mutual cooperation in the future. In the meantime, the Chevron country manager said, in an effort to build relationships here, Chevron will offer to send up to five people to the United States for a sub-surface forum the week of October 20. They will also take them to the Henry Hub and control center to see how it works. ¶5. (C) COMMENT: We agree that the national preference of limiting Western majors to being service providers or doing gas processing is short-sighted. Turkmenistan needs the expertise and technology Western companies can provide to work subsalt. It is the only way Turkmenistan can reach its production goals. END COMMENT. CURRAN