TURKMENISTAN: TNK-BP'S NEGOTIATIONS MOVING SLOWLY

C O N F I D E N T I A L ASHGABAT 000422 SIPDIS SIPDIS STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN COMMERCE FOR HUEPER ENERGY FOR EKIMOFF/THOMPSON E.O. 12958: DECL: 04/03/2018 TAGS: PREL EPET EINV TX SUBJECT: TURKMENISTAN: TNK-BP'S NEGOTIATIONS MOVING SLOWLY Classified By: CDA Richard E. Hoagland: 1.4(B),(D). ¶1. (C) During an April 2 meeting with Charge, TNK-BP Vice President for International Affairs Shawn McCormick (former U.S. National Security Council staffer) and Country Manager Oleg Lonovenko reported their company set up its office in Ashgabat in September 2007, separate from the office that BP is only now beginning to set up. TNK-BP is negotiating production sharing agreements (PSAs) to work several offshore Caspian blocks. When asked which blocks TNK-BP was particularly interested in, McCormick demurred, stating only that they want to bid on several blocks in which several other companies also are interested. (NOTE: This likely means that TNK-BP is bidding for blocks 19, 20 and 21 -- for which Lukoil/ConocoPhillips have been negotiating -- and/or blocks 22 and 23. END NOTE.) McCormick enthusiastically stated that his company likes competition, because TNK-BP can bring advantages to the table that trump what others can deliver. ¶2. (C) According to McCormick, TNK-BP eventually wants to work onshore, but -- like other foreign companies -- has been told by the authorities that Turkmenistan is not ready to approve any onshore PSAs. For now, TNK-BP is prepared to take that statement at face value, and instead, is working on demonstrating to the government that it can deliver. The company has submitted an offer to assist Turkmenistan with oil recovery in old fields, and has carried out 3-D seismic imaging of the (onshore) Kotur Tepe field, south of the Cheleken Peninsula. According to TNK-BP's data, there is still a good deal of oil left in the field, and there could be good results if a company were to use modern technology. The company has taken Turkmenistan officials to one of its fields in western Siberia, where TNK-BP could discuss its (mostly U.S.) high-tech approach in Russian -- something that led to a good dynamic, according to McCormick. ¶3. (C) During his briefing, Lonovenko off-handedly commented that TNK-BP would be investing in Turkmenistan's free tourist zone, Avaza, on the Caspian coast, but has not yet decided what form its investment will take. Charge asked him what he really thinks about Avaza. Lonovenko paused, blushed, and then said, "The only difference between adults and children is the cost of their toys." ¶4. (C) COMMENT: Although TNK-BP is far ahead of most of the other large oil companies in establishing an office here, it seems to be lagging in concluding any PSA negotiations. Increasingly, we are hearing from foreign businessmen already working in Turkmenistan that the Turkmen government is not eager to allow Russian hydrocarbon companies a foothold in Turkmenistan. No matter how much McCormick emphasized the company's links to the United States, most here in Turkmenistan consider TNK-BP to be primarily a Russian, rather than a U.S., entity. END COMMENT. HOAGLAND