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