TURKMENISTAN: FOR CHEVRON, IT'S NOW A MATTER OF

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000453

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

E.O. 12958: DECL: 04/10/2018
TAGS: PGOV PREL EPET TX
SUBJECT: TURKMENISTAN: FOR CHEVRON, IT'S NOW A MATTER OF
TRUST

REF: ASHGABAT 0415

Classified By: CDA Richard E. Hoagland: 1.4(B),(D).


1. (C) SUMMARY: According to Chevron's country manager,
Chevron's April 5 presentation to officials from
Turkmenistan's hydrocarbon sector (reftel) went smoothly, but
Turkmenistan is still unwilling to come to the table to
negotiate the company's bid to work onshore sub-salt gas
fields. While the Executive Director of the State Agency for
Management and Use of Hydrocarbon Resources, Bayrammurat
Muradov, characterized Chevron's presentation as
"interesting," he asked that Chevron provide more information
on how Chevron applies its processes and technology to its
drilling. Muradov raised some concerns about Chevron's
unwillingness to leave behind proprietary information, which
left the country manager wondering if this was evidence that
the government would not find his company a trustworthy
partner. Muradov is willing to give Chevron a chance to do a
second presentation, probably in May. Although frustrated
with the government's unwillingness to come to the table,
Chevron is already considering next steps, including the
possibility of providing a road trip, with which to address
Muradov's latest questions. But Under Secretary Jeffery
could play a helpful role during his April 20-22 visit in
determining whether Muradov's hesitation is due merely to a
different business culture, or whether there are other issues
at stake. END SUMMARY.


2. (C) During an April 9 meeting with EmbOff, Chevron
country manager Doug Uchikura said that Chevron's April 5
presentation to officials from Turkmenistan's hydrocarbon
sector (reftel) had occurred as planned. Chevron was given
three hours, rather than the planned two, to make its case to
over 30 officials from throughout Turkmenistan's hydrocarbon
bureaucracy. Although Deputy Chairman of the Cabinet of
Ministers for Oil and Gas Tachberdi Tagiyev did not attend,
his assistant did, as did Muradov, Deputy Minister of Oil and
Gas Nedirov and Turkmengaz Chairman Kakayev and his deputy
(Kakayev stayed only for an hour).

MURADOV'S FEEDBACK: TOO WEIGHTED ON PROCESS AND THEORY


3. (C) During an April 8 meeting with Uchikura, Muradov said
that the presentation had been interesting, and the State
Agency now understood that Chevron has extensive exploration
expertise. Although Chevron's presentation had been weighted
toward process and theory, there was not enough information
on "practical application." Turkmenistan wants a clearer,
more direct sense of how Chevron applies its processes and
technology to its drilling. Muradov said he has asked those
attending the April 5 presentation to send him specific
questions about the presentation, but could not tell Uchikura
when the State Agency would pass the questions to Chevron.

"NO PROBLEM WITH ACCESS TO RESOURCES...IF WE TRUST YOU"


4. (C) According to Uchikura, Muradov said that the
government is willing to give access to the country's
resources to those companies with which it feels comfortable.
(NOTE: According to Uchikura, in making this statement,
Muradov did not add any of the usual qualifications, such as
distinguishing between offshore and onshore production. END
NOTE.) Muradov expressed concern that Chevron was not being
completely transparent because it would not leave some of the
information that it had discussed during the presentation.
In addition, the presenters failed to answer some questions
about Chevroil's Tengiz operations as directly as the State
Agency had hoped. (NOTE: Uchikura told emboff that the

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information that the State Agency had wanted Chevron to leave
was business confidential, and the presenters had not
answered the questions on Tengiz because none of them had
been directly involved in the Tengiz operations. END NOTE.)
This issue of transparency is important, Muradov continued,
because Turkmenistan wants to know that it can trust any
future partners. If Chevron withholds information from the
government now, it could become even worse if/when the two
become partners.

CHEVRON NOW ONE OF FIVE INTERESTED IN ONSHORE OPS


5. (C) Muradov reiterated that the government is seeking
similar information on technical capabilities from Shell, BP,
Lukoil, and Total, all of which have expressed similar
interest in working onshore in the Amu Darya basin. (NOTE:
Uchikura said that Muradov did not mention either ExxonMobil
or ConocoPhillips, nor did he give any indication of how far
along these other four companies' proposals were. Uchikura
said Tagiyev and Muradov would get a chance to see Total's
facilities during their April 9-10 visit to Paris, and a look
at BP during their trip to London for the April 17-18 "Oil
and Gas in Turkmenistan Conference." END NOTE.)

TURKMENISTAN WILLING TO CONSIDER A JOINT VENTURE?


6. (C) Uchikura said that Muradov also hinted that the
government might be interested in a joint venture (JV)
arrangement, but it would have to feel comfortable with the
company. Turkmenistan has some hesitancy about JVs, because
it has been "burnt" once before. (COMMENT: Muradov was
probably referring to Turkmenistan's early 1990s arrangement
with Bridas, which has still not been resolved. END
COMMENT.) Muradov added that it is particularly important
for the State Agency to get a clearer sense of how Chevron
applies its processes and technology if the State Agency is
to be convinced to choose Chevron over its peers -- all the
more so because Chevron is unwilling to accept a service
contract arrangement.

CHEVRON TO GIVE A SECOND PRESENTATION


7. (C) Muradov also asked why Chevron had chosen to delay
its discussion of a Wood-MacKenzie gas market presentation
that it had initially planned also to give on April 5. When
Uchikura told him that Chevron had been unable to get Letters
of Invitation for the Wood-MacKenzie presenters in time for
the meeting, Muradov agreed to schedule a second presentation
once he returns from London.


8. (C) Uchikura said he believed that Muradov is seizing on
the issues of trust and practical application as a way of
side-stepping a decision to begin talking in earnest about
Chevron's bid. Uchikura expressed frustration with Muradov's
coy "focus on the moment." However, he and EmbOff worked
through a number of possible next steps, including:

-- Obtaining more information about Turkmenistan's plans and
priorities regarding foreign investment in the hydrocarbon
sector during the London hydrocarbon conference.

-- Preparing presentations for a three-hour meeting with a
Turkmen technical delegation scheduled for April 23 that are
light on process and seismic imaging, but heavy on practical
applications of Chevron's sub-salt, high-pressure,
high-temperature, high-sulphur drilling and producing
capabilities.

-- Developing a "field trip" to some of Chevron's drilling

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facilities for up to ten Turkmen officials that would give
them hands-on exposure to the practical application of
Chevron's integrated processes, technical expertise and
drilling and producing operations to demonstrate precisely
how Chevron would approach implementation of each phase of
its Amu Darya basin sub-salt proposal.

-- Working at developing trust by responding to all the
questions Chevron receives from Muradov and by following
through -- likely in May -- on the presentation of the
Wood-MacKenzie study.


9. (C) COMMENT: We believe what we are seeing is two
different cultures, each with its own priorities, working at
cross-purposes. Chevron's goal is to bring Turkmenistan into
negotiations quickly in order to get a definitive answer on
its bid. Chevron had placed high hopes that its April 5
presentation would be the key to bringing Turkmenistan to the
table. Even if Turkmenistan has decided that it is willing
to allow foreign companies to work onshore, as Muradov's
words to Uchikura suggest, it is still in no hurry to make
what it sees as a serious commitment. It would rather survey
the field to find the partner it is most comfortable with
before seeking to negotiate the best deal it can. Muradov's
words about "trust" are serious and are a natural outgrowth
of Turkmenistan's culture, which is based on personal
relationships. With other foreign companies apparently
closing in, however, Chevron's concerns are understandable.


10. (C) COMMENT CONTINUED: Despite Uchikura's frustration
with the State Agency, Chevron remains -- as far as we are
aware -- further along in its bidding process than any other
competitor that Muradov mentioned. The fact that Muradov is
giving Chevron a chance to do a second proposal is positive,
as is the fact that Muradov was willing to give as much
detailed feedback to the first briefing as he did. We
believe that many of Chevron's proposed next steps are
positive: just the fact that Chevron is prepared to
demonstrate its responsiveness to Turkmenistan's concerns
should help to build the trust that Ashgabat values.
However, we believe that Under Secretary Jeffery during his
April 20-22 visit could play a helpful role in determining
whether Muradov's unwillingness to commence negotiations is
focused on buying more time to survey the field, or whether
there are other factors at work. END COMMENT.
HOAGLAND