TURKMENGAS WILL RELY ON SERVICES COMPANIES TO

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001653

SIPDIS

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

E.O. 12958: DECL: 12/29/2018
TAGS: EPET ECON PGOV TX
SUBJECT: TURKMENGAS WILL RELY ON SERVICES COMPANIES TO
DEVELOP NEW FIELDS

REF: A. ASHGABAT 1324

B. ASHGABAT 1644

Classified By: Charge Richard Miles per reasons 1.4 (B) and (D).


1. (C) SUMMARY: According to the Chairman of Turkmengas, the
company will rely on foreign oilfield services companies for
the development of Turkmenistan's major gas deposits. He
suggested that negotiations with such firms are ongoing, but
would not share details. Concerning possible involvement by
IOCs, he deferred to the State Hydrocarbons Agency. The
Chairman was vague about the source for an additional 30 bcm
of gas to be delivered to China beginning next year. Foreign
companies working in Turkmenistan's hydrocarbons sector will
be expected to contribute to a Turkmengas training center
expected to open in 2010. END SUMMARY.


2. (C) During a December 29 meeting with poloff, Turkmengas
Chairman, Baymurad Khodjamukhamedov, listed the state gas
concern's main areas of activity as follows: the drilling of
wells, and the production, refining, export, and domestic
distribution of natural gas. Exploration activities are
conducted by another state concern, Turkmengeologiya, and
after exploration is completed, Turkmengas takes over
responsibility for further development of gas deposits. He
cited as an example the South Yolotan and Osman gas fields
(Ref A),where Turkmengas is ramping up its activities.

WILL RELY ON FOREIGN FIRMS TO MEET TECHNICAL CHALLENGES


3. (C) For the development of the South Yolotan field,
Khodjamukhamedov acknowledged the technical challenges
involved in producing the high sulphur, high pressure gas,
but said Turkmengas would rely on oilfield services
companies, both domestic and foreign. Turkmenneftegazstroy
could be a Turkmen services provider. When pressed for
Turkmengas' plans for developing the massive field, the
Chairman said he could not reveal the identities of
prospective services companies, including U.S-based firms,
until contracts are signed. However, numerous services
companies that sent representatives to the November
international oil and gas conference in Ashgabat were
interested. He would not address the potential role of
international oil companies in the development of South
Yolotan, saying that the State Agency for Hydrocarbons deals
exclusively with IOCs.

30 BCM PER YEAR TO CHINA ... FROM WHAT SOURCE?


4. (C) According to Khodjamukhamedov, Turkmenistan will
export 50 billion cubic meters of gas in 2008. He declined
to provide the figure for the year's total gas production.
The bulk of the exported gas is shipped to Russia. He did
not acknowledge any difficulty in meeting gas export
commitments beginning next year when the pipeline to China
will begin operation. While he mentioned that Turkmenistan
had agreed to provide China with 30 bcm per year, he would
not comment about how much gas would be supplied to China in
2009, nor about how much of the 30 bcm would be produced by
China National Petroleum Corporation (CNPC) under the terms
of its production sharing agreement. He said Turkmenistan
has a "unified system" of gas delivery, meaning that
production from specific fields is not earmarked for delivery
to specified buyers.


5. (C) Khodjamukhamedov pointed out that significant gas
production in western Turkmenistan is limited to offshore
projects and foreign companies. While it is primarily the
State Hydrocarbons Agency that deals with Petronas as a
foreign production company, he said Turkmengas has a role

ASHGABAT 00001653 002 OF 002


inasmuch as it buys Petronas' gas. He added that producers
such as Petronas are fee to sell their gas to any buyer.

TRAINING CENTER TO TAP FOREIGN EXPERTISE


6. (C) On the subject of training for Turkmengas staff,
Khodjamukhamedov said a facility is currently under
construction outside Ashgabat that will serve as a unified
training center for most of the company's employees. The
center is scheduled to open in 2010. He explained that all
foreign companies working in Turkmenistan's hydrocarbons
sector will also participate as sponsors of the center and
provide training.


7. (C) COMMENT: Chairman Khodjamukhamedov was clearly not
inclined to tip Turkmengas' hand concerning its plans for
development of the massive, challenging South Yolotan and
neighboring gas fields. It appears plans are moving ahead,
however, with the recent announcement that Gazprom will build
a facility there to prepare gas for transport (Ref B). Also,
notwithstanding Khodjamukhamedov's vagueness about the source
of new gas for China, in reality the Turkmen must be
scrambling to boost production by roughly 40 percent over
current levels in order to meet that commitment. It's also
possible that Khodjamukhamedov couldn't mention names of
potential services firms because various suitors are still
vying for obligatory presidential approval. In any event, he
indicated no shift in Turkmen resistance to onshore
production by Western IOCs. END COMMENT


8. (C) BIO NOTE: Baymurad Khodjamukhamedov was born on
November 15, 1961 in Ashgabat. In 1984, he graduated from
the Turkmenistan Polytechnic Institute, Oil and Gas Faculty
with specialities in hydrogeology and engineering geology.
From 1986-1991 he studied at the S. Ordzhonikidze Moscow
Geology Institute, completing his dissertation and becoming a
candidate of geology and mineralogy sciences. In 1991 he
joined Turkmengeologiya as an acting senior scientist. In
1996 he joined the Turkmen-Russian Joint Stock Company
"Turkmenrosgas" as a Chairman's Assistant. In 1997 he
transferred to Turkmenneftegas as the Minister's Assistant,
then was promoted to Head of Gas Export Department. In 2003
he was promoted to the Deputy Chairman of the National
Clearing Centre under the Cabinet of Ministers. In 2005 he
was appointed Head of Technical Department at Turkmengas. In
2007 he was appointed Head of Investment Management and State
Analyses, Head of External Affairs and Marketing Department
at the Ministry of Oil and Gas, then tranferred to the
position of Head of Supply Department at Turkmengas. In July
2007 he was appointed Minister of Oil and Gas. On August 27,
2008 Khodjamukhamedov was appointed to his current position
as Chairman of the Turkmengas State Concern. He is married
and has four children. END BIO NOTE.
MILES