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08ASHGABAT291 2008-03-01 08:05:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ashgabat
Cable title:  

TURKMENISTAN: PETRONAS PLANNING FOR EXPANDED

Tags:   PGOV PREL EPET AJ TX 
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UNCLAS SECTION 01 OF 02 ASHGABAT 000291

SIPDIS

SENSITIVE
SIPDIS

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

E.O. 12958: N/A
TAGS: PGOV PREL EPET AJ TX
SUBJECT: TURKMENISTAN: PETRONAS PLANNING FOR EXPANDED
PRODUCTION?

REF: A. ASHGABAT 0044


B. ASHGABAT 0254

1, (U) Sensitive but unclassified. Not for public Internet.



2. (SBU) SUMMARY: During a February 23 meeting, Petronas'
country manager told EmbOff that his company may seek to fund
the Turkmenistan portion of the Caspian littoral pipeline.
Although he continues to maintain that Petronas is planning
to produce only 10 bcm of natural gas per year, he said the
company is planning to build a 48-inch pipeline -- with the
potential to transport 20 bcm of gas per year -- from Block I
to shore. Whether this is because Petronas is hoping to
reach agreement with Canadian petroleum firm Buried Hill to
transport gas from Buried Hill's holding in block III to
shore (a possibility which Buried Hill's country manager
separately told Post he is considering), or Petronas is
planning to increase its production, is not yet clear. END
SUMMARY.



3. (SBU) During a February 23 lunch to introduce Petronas'
new country manager, Mohammed Ridza M. Shariff, the departing
country manager, Suleiman Abdullah, indicated that, contrary
to what he told Embassy personnel in January (Ref A), the new
Caspian littoral (Prikaspiskyy) natural gas pipeline will
follow the old Central Asian-Center III (CAC-III) pipeline
route. Turkmenistan is planning an all-new construction for
its portion of the pipeline that Russia, Kazakhstan and
Turkmenistan agreed to build during a May 2007 summit, since
refurbishing the old CAC-III pipeline would cost two-thirds
of the price of a new one. Petronas may fund the
construction of Turkmenistan's portion of the new Caspian
littoral pipeline. By contrast, he alleged, there has been a
real struggle to line up financing for the Kazakhstan portion
of the Caspian littoral pipeline.



4. (SBU) In the meantime, the company has decided to build a
48-inch pipeline from Block I to shore and is currently
surveying the proposed route. It expects to put out a
construction tender in about three months. Suleiman also
confirmed that Petronas has finished assembling a new
production platform, which is not yet operational, due to
Turkmenistan's unusually poor weather in January. (NOTE: A
U.S. official with detailed knowledge of Caspian energy notes
there is currently no barge in the Caspian that could lay
48-inch pipe. The largest capacity is 26-inch. END NOTE.)

BURIED HILL NOT IN TOUCH WITH PETRONAS



5. (SBU) Abdullah claimed not to be surprised by the news
that the Canadian firm, Buried Hill Energy, has received a
contract to work the disputed Block III (Ref B). He said he
has heard that the Azeri government did not oppose Buried
Hill's seismic imaging activities and suggested that the
decision to award Buried Hill the contract may be part of a
possible larger plan to exploit Block III's resources being
worked out between the governments of Turkmenistan and
Azerbaijan. Under this plan, Turkmenistan -- through Buried
Hill -- would have unhindered access to the Serdar field,
while Azerbaijan would continue to work the
Azeri/Chirag/Guneshli fields through BP.



6. (SBU) But, he said, Buried Hill has not been in touch
with Petronas yet, including to discuss the possibility of
transporting any associated gas that it might hit in Block
III onshore through a link-up to Petronas' pipeline from its
Block I rigs, though transporting its gas to shore through
Petronas' pipeline would be cheaper than building its own

ASHGABAT 00000291 002 OF 002


pipeline. Shariff added that Petronas's pipeline would have
excess capacity and could carry gas from Block III, if Buried
Hill reaches an agreement with Petronas. Abdullah also
confirmed comments by Buried Hill's country manager that all
non-Iranian rigs -- including the Maersk Explorer --
currently in the Caspian Sea are booked up for several years
to come. While Buried Hill may have its seismic imaging
complete in a few months -- and may be finished already if it
has only been carrying out 2-D seismic imaging -- the only
way it can begin drilling by the end of the year is if it
hires an Iranian rig or imports a rig from elsewhere, and
rigs are not in plentiful supply.



7. (SBU) COMMENT: Petronas has stated several times that it
faces real problems in terms of finding solutions for
exporting its gas, and it was willing as recently as January
to build its own pipeline north. Its alleged willingness to
pay a part or all of the costs for the Turkmenistan segment
of the new Caspian littoral pipeline would make sense if it
feels the pipeline will resolve its own gas transportation
issues. More interesting is Petronas' stated decision to
build a 48-inch pipeline -- which Abdullah confirmed can
carry up to 20 bcm of gas per year -- between Block 1 and the
shoreline. In the past, Abdullah has suggested Petronas'
natural gas production will reach at its peak only 10 bcm per
year. If this is so, the pipeline's excess capacity could
mean that Petronas is either planning to increase its
production, or wants to reach an agreement to transport
Buried Hill's gas to shore. END COMMENT.

BIO NOTE



8. (SBU) Mohammed Ridza M. Shariff has worked for Petronas
for 15 years, but never before outside of Malaysia. While he
did not say much during the lunch, letting Abdullah do most
of the talking, he seemed to be more thoughtful and candid
than his more garrulous colleague.
HOAGLAND