Identifier
Created
Classification
Origin
08ASHGABAT167
2008-02-04 06:01:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:
TURKMENISTAN: STATE HYDROCARBON AGENCY STILL ON
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C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000167
SIPDIS
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
USAID/W FOR EE/AA
E.O. 12958: DECL: 01/30/2018
TAGS: PREL PGOV EPET EINV TX
SUBJECT: TURKMENISTAN: STATE HYDROCARBON AGENCY STILL ON
LEARNING CURVE ABOUT CHEVRON
REF: A. ASHGABAT 0166
B. ASHGABAT 0165
C. ASHGABAT 0164
D. ASHGABAT 0049
Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4(B),(D)
C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000167
SIPDIS
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
USAID/W FOR EE/AA
E.O. 12958: DECL: 01/30/2018
TAGS: PREL PGOV EPET EINV TX
SUBJECT: TURKMENISTAN: STATE HYDROCARBON AGENCY STILL ON
LEARNING CURVE ABOUT CHEVRON
REF: A. ASHGABAT 0166
B. ASHGABAT 0165
C. ASHGABAT 0164
D. ASHGABAT 0049
Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4(B),(D)
1. (C) SUMMARY: On January 29, Executive Director of the
State Agency for Management and Use of Hydrocarbon Resources
Byrammurat Muradov told U.S. Coordinator for Eurasian Energy
Diplomacy Ambassador Steven Mann his agency is very close to
reaching an agreement with ConocoPhillips on two offshore
blocks. By contrast, he said, Chevron's proposal is more
problematic. Turkmenistan wants to work with Chevron and
likes the company's joint venture proposal, but officials
want to avoid establishing a "father-son" relationship
similar to the one it already has with Gazprom. Mann put in
a plug for hiring consultants, and handed over a list of
international law firms. He also stressed that only powerful
hydrocarbon firms can provide the resources and technology
that Turkmenistan needs to work large fields and fund
pipelines. END SUMMARY.
MANN SUGGESTS VALUE OF INTERNATIONAL ANALYSIS AND ADVICE
2. (C) Characterizing sitting down with a negotiating
partner -- particularly with Gazprom -- as being like
participating in a chess match, Mann stressed the benefits of
having expert analysis and advice "during the breaks." Mann
passed to Muradov a list of international law firms that
could provide legal advice to the State Agency during its
negotiations with foreign firms wishing to enter
Turkmenistan's offshore hydrocarbon production sector.
(NOTE: Muradov had welcomed U.S. assistance to identify
reputable international law firms during a January 10 meeting
with the Charge (reftel D). END NOTE.) Mann also offered
to give Muradov an analysis of the legal aspects of off-shore
development President Berdimuhamedov had requested in their
meeting earlier in the day (reftel C) the next time he comes
to Turkmenistan. Mann noted Turkmenistan needs
well-established, serious international firms. Only these
firms have the resources to work large fields and fund
pipelines. Chevron has submitted an initial proposal and is
waiting for a sign of interest from the government. The
president told Mann he would approve a more detailed proposal
from Chevron, and Mann conveyed that to Muradov.
MURADOV: CONOCOPHILLIPS CLOSE TO AGREEMENT
3. (C) Agreeing that Berdimuhamedov wants to see a strong
U.S. company active in Turkmenistan because this would send a
signal to other investors, Muradov indicated that the State
Agency is very close to reaching an agreement that would
allow Lukoil/ConocoPhillips to work (offshore) blocks 19 and
20. These are the two blocks that Western Atlas has
identified as being the most promising. The State Agency
still needs to resolve a few sensitive issues, with
arbitration provisions a prominent one.
CHEVRON PROPOSAL CREATES DILEMMAS
4. (C) According to Muradov, Turkmenistan considers Chevron
a powerful, serious company, but has some problems with the
proposal:
ASHGABAT 00000167 002 OF 003
-- Although Chevron bid on the Serdar field in the Caspian,
Turkmenistan considers this to be a field rather than a
block. Turkmenistan can only sign production sharing
agreements to develop blocks, not fields.
-- While Chevron had made a very interesting proposal for
on-shore development -- and Turkmenistan likes the legal,
financial, and technological aspects of Chevron's
joint-venture proposal -- the country needs to be ready to be
a partner. The problems are not just structural:
Turkmenistan does not want "another father-son relationship"
as it has with Gazprom. Turkmenistan wants a partnership,
but needs to find a mechanism that will allow it to grow and
to strengthen its capacity. It wants to see the precise
mechanisms of how the joint venture would work.
-- Chevron's proposal to develop the Amu Darya basin covers
too large an area. It is unclear what areas Chevron is
proposing to develop, what steps Chevron would take, and what
its plan of action would be. If the two sides are to agree
to a joint venture, Chevron needs to define specifically
where on-shore it wants to work.
INCREASING HYDROCARBON SECTOR CAPACITY A TOP PRIORITY
5. (C) Muradov reiterated the need to increase
Turkmenistan's capacity in the hydrocarbon sector. "We can
buy equipment and can contract out fields, but we can't do
anything on our own without trained personnel." Agreeing
that training is important, Mann informed Muradov that the
U.S. Trade and Development Agency will begin a training
program for Turkmenistan's hydrocarbon sector on February 21.
Muradov was grateful for the news.
6. (C) Noting that Turkmenistani officials had been watching
the Kashagan negotiations closely, Muradov emphasized that
his country wants partners that are looking for a long-term
relationship, rather than just excessive profits.
Turkmenistan is maneuvering carefully and trying to foresee
potential problem areas, in an effort to avoid becoming
involved in a similar situation. "We need to feel it,
believe it," that tangible benefits, including training will
come from cooperation with major firms. Mann again plugged
the importance of hiring consultants, and of working with
powerful hydrocarbons firms, who are are concerned for solid
business reasons with maintaining a good image and defending
their brand.
7. (C) COMMENT: Muradov, always an open interlocutor, was
true to form. His readout seems to confirm that the only
thing standing between Lukoil/ConocoPhillips and a contract
is the State Agency's lack of confidence -- a problem that
good legal consultants should help to address. We strongly
suspect as well that the Bridas arbitration saga might
underlie the State Agency's cautiousness. We believe good
possibilities exist for Chevron, despite Muradov's assertions
that there are problems with Chevron's proposal. Although
the fundamental problem seems to be Turkmenistan's desire to
work on-shore with a major hydrocarbon company only in a
service capacity, we believe there is room and time for
negotiations to continue and for mutual understanding to
grow. Given Turkmen unfamiliarity with international
business, it is impossible to overstate the degree of
ASHGABAT 00000167 003 OF 003
hand-holding and spelling-out that Western firms must do when
conducting business here. END COMMENT.
8. (U) Ambassador Mann has cleared this cable.
HOAGLAND
SIPDIS
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
USAID/W FOR EE/AA
E.O. 12958: DECL: 01/30/2018
TAGS: PREL PGOV EPET EINV TX
SUBJECT: TURKMENISTAN: STATE HYDROCARBON AGENCY STILL ON
LEARNING CURVE ABOUT CHEVRON
REF: A. ASHGABAT 0166
B. ASHGABAT 0165
C. ASHGABAT 0164
D. ASHGABAT 0049
Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4(B),(D)
1. (C) SUMMARY: On January 29, Executive Director of the
State Agency for Management and Use of Hydrocarbon Resources
Byrammurat Muradov told U.S. Coordinator for Eurasian Energy
Diplomacy Ambassador Steven Mann his agency is very close to
reaching an agreement with ConocoPhillips on two offshore
blocks. By contrast, he said, Chevron's proposal is more
problematic. Turkmenistan wants to work with Chevron and
likes the company's joint venture proposal, but officials
want to avoid establishing a "father-son" relationship
similar to the one it already has with Gazprom. Mann put in
a plug for hiring consultants, and handed over a list of
international law firms. He also stressed that only powerful
hydrocarbon firms can provide the resources and technology
that Turkmenistan needs to work large fields and fund
pipelines. END SUMMARY.
MANN SUGGESTS VALUE OF INTERNATIONAL ANALYSIS AND ADVICE
2. (C) Characterizing sitting down with a negotiating
partner -- particularly with Gazprom -- as being like
participating in a chess match, Mann stressed the benefits of
having expert analysis and advice "during the breaks." Mann
passed to Muradov a list of international law firms that
could provide legal advice to the State Agency during its
negotiations with foreign firms wishing to enter
Turkmenistan's offshore hydrocarbon production sector.
(NOTE: Muradov had welcomed U.S. assistance to identify
reputable international law firms during a January 10 meeting
with the Charge (reftel D). END NOTE.) Mann also offered
to give Muradov an analysis of the legal aspects of off-shore
development President Berdimuhamedov had requested in their
meeting earlier in the day (reftel C) the next time he comes
to Turkmenistan. Mann noted Turkmenistan needs
well-established, serious international firms. Only these
firms have the resources to work large fields and fund
pipelines. Chevron has submitted an initial proposal and is
waiting for a sign of interest from the government. The
president told Mann he would approve a more detailed proposal
from Chevron, and Mann conveyed that to Muradov.
MURADOV: CONOCOPHILLIPS CLOSE TO AGREEMENT
3. (C) Agreeing that Berdimuhamedov wants to see a strong
U.S. company active in Turkmenistan because this would send a
signal to other investors, Muradov indicated that the State
Agency is very close to reaching an agreement that would
allow Lukoil/ConocoPhillips to work (offshore) blocks 19 and
20. These are the two blocks that Western Atlas has
identified as being the most promising. The State Agency
still needs to resolve a few sensitive issues, with
arbitration provisions a prominent one.
CHEVRON PROPOSAL CREATES DILEMMAS
4. (C) According to Muradov, Turkmenistan considers Chevron
a powerful, serious company, but has some problems with the
proposal:
ASHGABAT 00000167 002 OF 003
-- Although Chevron bid on the Serdar field in the Caspian,
Turkmenistan considers this to be a field rather than a
block. Turkmenistan can only sign production sharing
agreements to develop blocks, not fields.
-- While Chevron had made a very interesting proposal for
on-shore development -- and Turkmenistan likes the legal,
financial, and technological aspects of Chevron's
joint-venture proposal -- the country needs to be ready to be
a partner. The problems are not just structural:
Turkmenistan does not want "another father-son relationship"
as it has with Gazprom. Turkmenistan wants a partnership,
but needs to find a mechanism that will allow it to grow and
to strengthen its capacity. It wants to see the precise
mechanisms of how the joint venture would work.
-- Chevron's proposal to develop the Amu Darya basin covers
too large an area. It is unclear what areas Chevron is
proposing to develop, what steps Chevron would take, and what
its plan of action would be. If the two sides are to agree
to a joint venture, Chevron needs to define specifically
where on-shore it wants to work.
INCREASING HYDROCARBON SECTOR CAPACITY A TOP PRIORITY
5. (C) Muradov reiterated the need to increase
Turkmenistan's capacity in the hydrocarbon sector. "We can
buy equipment and can contract out fields, but we can't do
anything on our own without trained personnel." Agreeing
that training is important, Mann informed Muradov that the
U.S. Trade and Development Agency will begin a training
program for Turkmenistan's hydrocarbon sector on February 21.
Muradov was grateful for the news.
6. (C) Noting that Turkmenistani officials had been watching
the Kashagan negotiations closely, Muradov emphasized that
his country wants partners that are looking for a long-term
relationship, rather than just excessive profits.
Turkmenistan is maneuvering carefully and trying to foresee
potential problem areas, in an effort to avoid becoming
involved in a similar situation. "We need to feel it,
believe it," that tangible benefits, including training will
come from cooperation with major firms. Mann again plugged
the importance of hiring consultants, and of working with
powerful hydrocarbons firms, who are are concerned for solid
business reasons with maintaining a good image and defending
their brand.
7. (C) COMMENT: Muradov, always an open interlocutor, was
true to form. His readout seems to confirm that the only
thing standing between Lukoil/ConocoPhillips and a contract
is the State Agency's lack of confidence -- a problem that
good legal consultants should help to address. We strongly
suspect as well that the Bridas arbitration saga might
underlie the State Agency's cautiousness. We believe good
possibilities exist for Chevron, despite Muradov's assertions
that there are problems with Chevron's proposal. Although
the fundamental problem seems to be Turkmenistan's desire to
work on-shore with a major hydrocarbon company only in a
service capacity, we believe there is room and time for
negotiations to continue and for mutual understanding to
grow. Given Turkmen unfamiliarity with international
business, it is impossible to overstate the degree of
ASHGABAT 00000167 003 OF 003
hand-holding and spelling-out that Western firms must do when
conducting business here. END COMMENT.
8. (U) Ambassador Mann has cleared this cable.
HOAGLAND