TURKMENISTAN: IMMENSE VOLUMES OF NATURAL GAS ARE CONFIRMED

UNCLAS SECTION 01 OF 02 ASHGABAT 001362

SIPDIS

STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN, SPECIAL ENVOY
GRAY, ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER

E.O. 12958: N/A
TAGS: PGOV ECON EPET EINV TX
SUBJECT: TURKMENISTAN: IMMENSE VOLUMES OF NATURAL GAS ARE CONFIRMED
IN EASTERN TURKMENISTAN

REF: ASHGABAT 1324


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: The general manager of the British firm Gaffney,
Kline & Associates, which just completed an independent audit of the
natural gas fields in South Yoloten-Osman and Yashlar, presented the
results of their study to a special session of the Cabinet of
Ministers on October 13th. The audit verifies that the volume of
gas in the South Yoloten-Osman field ranges from four trillion to
fourteen trillion cubic meters of natural gas, making it the fourth
or fifth largest field in the world. The government of Turkmenistan
had gone to great lengths to ensure the independence of the audit in
order to reassure foreign investors regarding several large-scale
gas pipeline construction projects. Deputy Chairman Tagiyev had
told Western visitors that the audit would show an even higher
volume. Since two of the individuals present in that meeting
confirmed this to us, we wonder if Tagiyev was trying to impress his
foreign visitors. At least one observer believes the Gaffney, Kline
audit is a "conservative" estimate of Turkmenistan's gas reserves,
because there are still 27 other fields onshore to evaluate. END
SUMMARY.

EVALUATION OF EASTERN TURKMENISTAN GAS RESERVES REVEALED


3. (SBU) On October 13, President Berdimuhamedov held an expanded
session of the Cabinet of Ministers in which Jim Gillett, Manager of
the British firm Gaffney, Kline & Associates (GKA) presented the
results of its audit of gas reserves in the South Yoloten-Osman and
Yashlar fields in eastern Turkmenistan. The audit had been conducted
in accordance with international standards for the evaluation and
classification of natural gas reserves, and confirms that volume of
deposits in South Yoloten-Osman field ranges between 4 trillion
cubic meters to 14 trillion cubic meters of natural gas. This makes
it the fourth or fifth largest natural gas field in the world.

AUDITING TO REASSURE FOREIGN INVESTORS


4. (SBU) Following Mr. Gillett's presentation, President
Berdimuhamedov underscored Turkmenistan's absolute confidence in the
abundance of its hydrocarbon reserves. He said that the fact that
international companies were closely involved in the audit of oil
and gas fields was essential in order to reassure large-scale
foreign investors in the development of gas fields and construction
of pipelines. He said that the audit proves that Turkmenistan may
now move ahead with all plans in the sphere of fuel energy expansion
and development. He went on to praise the work of the Turkmen
specialists that was confirmed by the audit.

JOINT EFFORTS AND MECHANISM OF EVALUATION


5. (SBU) Later, in an interview with Turkmen Dowlet Khabarlary
(Turkmen State Information Agency),Gillett said that the GKA's
audit, conducted in accordance with international standards, was
able to confirm the "excellent work" carried out and the results
obtained by the state corporation "Turkmengeologiya"
(TurkmenGeology) after the discovery of a vast natural gas field.
Turkmen geologists then spent a month at GKA's UK offices presenting
the results of their data as the audit was prepared.

VAST GAS RESERVES CONFIRMED


6. (SBU) According to Gillett, GKA's evaluations are routinely
presented at three levels: "low, optimal and high." On South
Yoloten-Osman field, the low estimate was calculated at 4 trillion
cubic meters, optimal at 6 trillion cubic meters, and the high at 14
trillion cubic meters of natural gas. He said that South
Yoloten-Osman's optimal estimate is five times larger than the
largest existing gas field at Dowletabad, making South Yoloten-Osman
the fourth or fifth largest gas field in the world.

DEVELOPMENT OF THE FIELD

ASHGABAT 00001362 002 OF 002




7. (SBU) Gillett went on to say that that it is generally
preferable to develop such enormous fields in stages, at the rate of
10 billion cubic meters of gas per year. He recommended that
development of the South Yoloten-Osman be increased gradually, up to
a maximum of 70 billion cubic meters per year.

EVALUATION OF ANOTHER FIELD


8. (SBU) In addition to the South Yoloten-Osman field, GCA
conducted an audit of the Yashlar field and estimates reserves there
of between .25 trillion 1.5 trillion cubic meters of natural gas. He
concluded by emphasizing that GKA looks forward to offering its
services to Turkmenistan in the future.

"CONSERVATIVE" ESTIMATE


9. (SBU) One longtime Western observer told us that he believes that
the Gaffney-Kline audit was a "conservative" estimate of the
country's gas reserves, because there are another 27 fields onshore
to evaluate. He also offered that depending on extraction rates,
the South Yoloten-Osman reserves could last 40-70 years (possibly
more),but are very high in sulfur. Given the technological
challenges of extracting the sour gas, it will take an initial
investment of at least $4 - 5 billion to start. In addition, they
will need 4,000 - 5,000 workers. Recognizing that they do not have
either the sufficient technological expertise or level of qualified
workers, it will take outside assistance. And given the technology
necessary, it would rule out cooperation with Russian or Chinese
firms. Only Western firms have the expertise. Our contact pointed
out that the Chinese had tried to drill subsalt and the result was
an accident where 44 workers were killed.


10. (SBU) COMMENT: Turkmenistan wisely engaged an internationally
recognized firm to conduct that audit of the reserves of its eastern
gas fields. This was absolutely essential to attracting large-scale
foreign investors for both the development of the fields and a
number of significant gas pipeline construction projects. It
further serves to assure the international community and businesses
that Turkmenistan has the volume to meet its natural gas export
demands. However, extraction is another issue. Deputy Chairman
Tagiyev had told Western visitors that the audit would show an even
higher volume (reftel). Since two of the individuals present
confirmed this to us, we are unsure if Tagiyev was being hopeful or
just wanted to impress his foreign visitors, knowing that
Turkmenistan has even more reserves, in any case. END COMMENT.

CURRAN