TURKMENISTAN: MIDLAND OIL FRUSTRATED

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000278

SIPDIS

SIPDIS

STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HEUPER
USAID/W FOR EE/AA

E.O. 12958: DECL: 02/27/2018
TAGS: PGOV PREL EINV EPET SOCI TX
SUBJECT: TURKMENISTAN: MIDLAND OIL FRUSTRATED

REF: ASHGABAT 0186

Classified By: CDA RICHARD E. HOAGLAND: 1.4 (B),(D)


1. (C) Charge met February 27 with Chairman of the Board and
President of the U.S.-based Midland Oil and Gas Company
Robert Murphy. When they first met on February 1, and again
when Murphy provided an update on February 6, he was
confident Midland was in pre-qualification status for five
major sectoral projects worth potentially $16.2 billion using
a consortium of 27 companies, and would begin serious
contract negotiation within one month. Close to a month
later, Murphy was frustrated because "nothing has happened,"
despite the fact President Berdimuhamedov, whom he had hosted
at the New York Stock Exchange in September 2007, had
reportedly told him at the end of January, "You will not
leave here empty-handed."


2. (C) Murphy said his primary contacts, as instructed by
Berdimuhamedov, are Deputy Prime Minister Tachberdy Tagiyev
and State Agency for Hydrocarbons Director Bayrammurad
Muradov. Muradov had told Murphy to submit all his initial
proposals to him and he would forward them to the proper
ministries with "appropriate but non-committal cover letters"
basically saying, "We have received this proposal and approve
that you consider it." Murphy lamented the ministries will
not accept the proposals directly from Midland without the
cover letters, and he's now waited close to a month for the
letters.


3. (C) Murphy said of the various sectors he'd focused on
initially (reftel),"it would still be worth it all" if he
could see movement on three:

-- the rights to off-shore hydrocarbon blocks 23, 30, and 31;

-- a nation-wide on-shore oil and gas service contract for
drilling intensification and improvement of existing wells;
and

-- a comprehensive telecommunications package that would
include a national high-speed wireless Internet system, a
national cell-phone system, and an electronic information
system for the existing commodity exchange and eventual stock
market.


4. (C) Murphy offered a number of speculations why he's seen
no movement so far:

-- the Turkmen don't have the slightest idea how to conduct
Western-style business and abhor being decisive;

-- the Turkmen viscerally distrust Western companies based on
their previous Bridas (Argentina) experience;

-- based on an off-hand comment by Muradov -- "We don't want
you to run away like Mobil did" -- the Turkmen want to make
sure Midland is serious but don't have the faintest idea how
to do due diligence;

-- the Turkmen are biding their time waiting for the best
offer to slip over the transom;

-- the Turkmen genetically detest saying "no," preferring a
slow, wasting death as the lesser evil;


ASHGABAT 00000278 002 OF 002


-- vested interests, especially Russian companies, are
maneuvering behind the scenes to ensure they don't lose their
positions; and

-- all of the above, or none of the above.


5. (C) Murphy admitted for a while he had wondered if
officials might be waiting for bribes just to initiate
action, but he said he has had not one single request or even
indirect hint. He hastened to add that Midland follows the
spirit and the letter of the Foreign Corrupt Practices Act.


6. (C) Murphy told Charge he will probably leave Ashgabat in
a few days once again empty-handed, but he will not give up.
Midland Executive Vice President of Development Richard
Visovsky will now spend most of his time in Ashgabat trying
to find the right levers to pull to move things forward.
HOAGLAND