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