TURKMENISTAN: EXXONMOBIL MOVING SLOWLY

C O N F I D E N T I A L ASHGABAT 000405 SIPDIS SIPDIS STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: DECL: 03/31/2018 TAGS: PREL EPET EINV TX SUBJECT: TURKMENISTAN: EXXONMOBIL MOVING SLOWLY Classified By: CDA RICHARD E. HOAGLAND: 1.4 (B),(D) ¶1. (C) On March 28, ExxonMobil Caspian Area Manager Robert Young told the Charge that ExxonMobil is "struggling" to see whether there are any big, tough, challenging hydrocarbon production projects -- the type of project ExxonMobil does best -- in Turkmenistan. Things are going slowly, because there is not a good match-up between Turkmenistan's and ExxonMobil's organizational structures. In addition, ExxonMobil believes that Turkmenistan does not fully appreciate the fact that ExxonMobil is different from most of the mid-sized companies with which the country is currently dealing. ¶2. (C) Young indicated that ExxonMobil is looking at possibly doing work onshore. Offshore, there is little prospect of big operations because there is too much sand and not enough seals and structures. Onshore, the Murgab depression, located in southeastern Turkmenistan, is "interesting" -- there is a potential for big projects, sour gas, and difficult situations. Even though Minister of Oil and Gas Hojamuhammedov told gas conference participants March 28 that "at the moment" Turkmenistan is only considering allowing foreign companies to work onshore in a service capacity, ExxonMobil is prepared to go slowly to rebuild the trust that it has been warned was lost when it withdrew from Turkmenistan in the 1990's. (NOTE: Prior to 2002, Mobil had an agreement to explore the right bank of the Amu Darya River (where China National Petroleum Corporation now has a production sharing agreement),and was considering the feasibility of producing gas for a proposed pipeline to China. After its merger with Exxon -- which had fields of its own in southwestern Turkmenistan south of Nebitdag (now Balkanabat),it opted to pull out, reportedly because a hole that Mobil had drilled was dry. Its departure reportedly left some in Turkmenistan, including the oil professional like Deputy Premier Tagiyev and Turkmengaz Chairman Kakayev, displeased. END NOTE.) ¶3. (C) COMMENT: ExxonMobil may face a steep uphill battle to land a contract for the Murgab basin. Chevron, too, is interested in working the same general area, and submitted a full-fledged bid March 11. With ExxonMobil far behind its competitor, its go-slow approach may hurt it, unless Chevron decides to withdraw its bid because the Government of Turkmenistan continues to reject the idea of offering a major oil company a contract to work onshore. END COMMENT. HOAGLAND