TURKMENISTAN: MIDLAND OIL SEEKS HYDROCARBON DEAL

C O N F I D E N T I A L ASHGABAT 000169

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STATE FOR SCA/CEN, EEB
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E.O. 12958: DECL: 02/04/2018
TAGS: PREL EPET EINV TX
SUBJECT: TURKMENISTAN: MIDLAND OIL SEEKS HYDROCARBON DEAL


Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4 (B),(D)


1. (C) The Chairman of the Board and President of the
U.S.-based Midland Oil and Gas Company Robert Murphy visited
Ashgabat January 29-February 2 with a delegation of
consortium members to see whether he could work out a
hydrocarbon deal. Murphy met on January 30 with President
Berdimuhamedov, whose trip to the New York Stock Exchange he
had arranged during the president's September 2007 visit to
New York. (COMMENT: Midland chose to work exclusively
through the South Korean Embassy, rather than through the
U.S. Embassy, for the meeting. Korean-Americans dominate
Murphy's consortium. Charge learned of the Midland
delegation's visit during a casual conversation with the
South Korean ambassador on January 28. END COMMENT.)
Murphy's delegation included Midland's Chief Executive
Officer Mehmet Arif Yukler, the president of the Rainier
Group (an investment and consulting firm) Soung Eun Hong, and
two senior vice presidents of the Ko-Turkmen Caspian Sea Oil
and Gas Corporation, Young Chang and public relations
specialist Mirso Lekic -- all of whom Murphy introduced as
U.S. citizens. (NOTE: Turkmenistan's state-owned media
identified the president of the Wayne, New Jersey-based
Rainier Group as the director of the South Korean "Nara"
bank. END NOTE.)


2. (C) Murphy told the Charge February 1 this had been his
first time to meet President Berdimuhamedov. He found the
president "dynamic" and "like a breath of fresh air." But it
was not Murphy's first visit to Ashgabat. He had visited in
2006 and thought he was close to a deal with former President
Niyazov, but then Midland had to "regroup" when Niyazov died
in December 2006. Murphey was also in Ashgabat in July 2007,
when he met with Cabinet Deputy Chairman for Oil and Gas
Tachberdi Tagiyev, Cabinet Deputy Chairman/Foreign Minister
Rashit Meredov, and Executive Director of the State Agency
for Management and Use of Hydrocarbon Resources Byrammurat
Muradov. Murphey said he was in Ashgabat this time hoping to
negotiate a concession to work an off-shore Caspian block and
an on-shore block in western Turkmenistan. (NOTE: Although
Murphey expressed interest in working both oil and gas, he
was unwilling to specify which blocks his firm was bidding
on. He said vaguely Midland's greater interest was probably
oil. END NOTE.) Claiming that "they know our intentions,"
Murphy said he had excellent meetings with hydrocarbon sector
officials, and hoped to depart the country with a signed
memorandum of understanding, with a view toward registering
the company and establishing an office in Ashgabat by late
spring. He and his consortium members also discussed
building pipelines and an oil refinery with President
Berdimuhamedov, though he said these projects would have a
longer timeline.


3. (C) COMMENT: Midland Oil is just one of a number of
small and medium-sized hydrocarbon firms now seeking to do
business in Turkmenistan. Turkmenistan's current hydrocarbon
authorities are not experts with long international
experience and have stressed both their concern that they
will be taken advantage of and their wish for long-term
partnerships. It is natural that officials would gravitate
toward smaller firms, believing that they have the expertise
that Turkmenistan needs yet are easier to control than the
"majors." Yet in considering a relationship with another
small hydrocarbon firm, Turkmenistan may be putting off what
it really needs -- a reliable "major" partner well-placed to
help the country become a genuinely world-class provider.
END COMMENT.
HOAGLAND