C O N F I D E N T I A L ASHGABAT 000626

SIPDIS

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

E.O. 12958: DECL: 05/15/2018
TAGS: PREL EPET TX
SUBJECT: TURKMENISTAN: CHEVRON UPDATE

REF: A. ASHGABAT 0588


B. ASHGABAT 0365

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


1. (C) During a May 14 briefing to update the Charge on the
current state of play of Chevron's bid to produce deep
sub-salt natural gas in Turkmenistan's Amu Darya basin,
Chevron Country Manager Doug Uchikura repeated most of the
information contained Ref A. However, he added that Chevron
is drafting an operating services agreement (OSA) as a more
detailed follow-on to their previous indicative bid to begin
negotiations. Uchikura emphasized Chevron is focusing solely
on the onshore possibility, even through Turkmenistan
continues to insist it will allow no new production sharing
agreements (PSAs) onshore. From the beginning, Chevron has
said it can be flexible to craft a final contract that would
not be a PSA, which would be traditional and ideal, but also
would not be simply a service contract, which Turkmenistan so
far demands onshore but which would not interest Chevron. So
far, Turkmenistan has not outright rejected Chevron's concept
of an OSA, but, Uchikura said, the sticking point is the U.S.
Securities and Exchange Commission requirement that a U.S.
energy firm show "booked reserves." Uchikura said he still
needs to convince his skittish Turkmen interlocutors that
Chevron would not "own" the booked reserves. Further, he
needs to wear down the old guard, like Deputy Prime Minister
for Oil and Gas Tachberdi Tagiyev, who continue to insist
"only service contracts onshore."


2. (C) Uchikura also told the Charge that German oil firm
Wintershall had approached Chevron about a possible
partnership (see Ref B for Wintershall's perspective on this
issue). Chevron's general model is to develop partnerships,
and it is considering a number of options in Turkmenistan,
including a possible arrangement with China National
Petroleum Corporation. While Chevron is interested in a
possible partnership with Wintershall, it has not made a
commitment because Chevron still does not know whether the
Government of Turkmenistan will impose a partner as a
condition for Chevron getting a contract. Chevron first
wants to square things with the government before considering
other business arrangements. Uchikura also reiterated to the
Charge -- as he did on May 6 to EmbOff -- that Chevron would
very much like to see President Berdimuhamedov receive an
invitation to Washington to meet President Bush. Chevron
hoped that such an invitation could be timed to coincide with
the signing of a Chevron contract.


3. (C) COMMENT: Unlike other major U.S. oil companies
wishing to produce natural gas in Turkmenistan, Chevron has
gone out of its way to keep Post well briefed-in on the
current state of play of its efforts. This may be due in
large part to Chevron's recognition that it will need U.S.
government assistance as it tries to do something well
outside of the Government of Turkmenistan's current comfort
zone. END COMMENT.
HOAGLAND