TURKMENISTAN: AUSTRIA'S OMV JUMPS INTO THE ENERGY

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000771 SIPDIS STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN USEU BRUSSELS FOR SPECIAL ENVOY GRAY ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: DECL: 06/17/2018 TAGS: PGOV PREL EPET AJ RU AU TX SUBJECT: TURKMENISTAN: AUSTRIA'S OMV JUMPS INTO THE ENERGY FRAY Classified By: CDA RICHARD E. HOAGLAND: 1.4(B),(D) ¶1. (C) SUMMARY: During a June 17 meeting, Austrian oil company OMV's Country Manager for the Caspian Region, Wolfgang Sporrer, told the Charge that his company will propose two separate gas deals to Turkmenistan: a simple gas-at-the-border purchase (OMV is willing to build the pipeline to transport the gas to Azerbaijan) or an arrangement in which an OMV-led consortium would work onshore in eastern Turkmenistan under a service agreement. If Turkmenistan's hydrocarbon officials seem interested, OMV will send its CEO to meet with President Berdimuhamedov in hopes of working a deal. In the meantime, OMV is opening an office in Ashgabat with the assistance of a young, reputedly well-connected Turkmen oil trader. Briefly touching on Southstream, Sporrer defended the pipeline as a possible mechanism for gaining Russia's agreement to a trans-Caspian pipeline. However, he strongly denied that his company has agreed to participate in the Southstream project. END SUMMARY. OMV TO PROPOSE TWO POSSIBLE DEALS ¶2. (C) Austrian oil company OMV is hoping to strike one of two possible gas deals with Turkmenistan, according to Sporrer, who is in Ashgabat for meetings with the Executive Director of the State Agency for Management and Use of Hydrocarbon Resources, Bayrammurat Muradov. In the first, OMV would "purchase gas at the border" in the Caspian. Sporrer said OMV would be willing, possibly with Azerbakijan's SOCAR, to build the production pipeline to link Turkmenistan's and Azerbaijan's offshore infrastructures. He said OMV is looking at Turkmenistan's offshore Livanov field for the gas, which may produce up to 15 bcm of associated gas per year (Livanov is Block I, currently worked under a production sharing agreement by the Malaysian oil company Petronas). ¶3. (C) Alternatively, Sporrer said, OMV is prepared to offer Turkmenistan a bid for an integrated project onshore in the Amu Darya Basin in eastern Turkmenistan. Under this plan, an OMV-led consortium, working under a service agreement, would carry out exploration and development of onshore fields. The consortium would take its payment in gas, and would reinvest at least some of the funds into Turkmenistan's petrochemical industry. In describing the arrangement that his company is offering, Sporrer said that the consortium would propose to do everything, requiring Turkmenistan simply to take the cash and accept OMV's presence in the country. If Muradov seems receptive to either proposal, OMV will begin working on a meeting between its CEO and President Berdimuhamedov to help push its proposal along. OMV TO OPEN AN ASHGABAT OFFICE ¶4. (C) According to Sporrer, OMV is working on opening a one-man office in Ashgabat, staffed by a "talented, well-connected" Turkmen. In setting up its office, OMV is relying on assistance from Murad Nepesov, whom Sporrer described as a young (mid-30's) Turkmen citizen -- "the closest thing Turkmenistan has to a mini-oligarch" -- who Sporrer met at a conference. (NOTE: Embassy does not know Nepesov personally, but has been told that he is a part of the Nepesov clan, which also includes a very well-known Soviet-era philologist, the rector of the Azadi World Languages Institute, and a former Minister of Sports and Tourist Industry and former Ambassador to Ukraine. END ASHGABAT 00000771 002 OF 002 NOTE.) Sporrer claimed that Nepesov is an oil trader, fluent in English, who commutes regularly among Dubai, Vienna, Moscow and Turkmenistan. In fact, Sporrer said, the last time he saw Nepesov -- in Vienna -- the young man was sitting in a restaurant with former President Niyazov's son, Murad. Sporrer claimed that Nepesov is being helpful because he wants an oil-trading "in" with OMV. (NOTE: Since we don't know Nepesov, we reserve comment. END NOTE.) A MECHANISM FOR GAINING RUSSIAN AGREEMENT TO TCP ¶5. (C) Sporrer raised the Southstream pipeline in the context of a possible solution for persuading Russia to accept a trans-Caspian pipeline (TCP). Noting that Austria has an extremely good relationship with Russia, its oldest gas supplier, he suggested that Russia might acquiesce to a TCP if it could send more of its gas through Austria, bypassing Ukraine and Belarus. Southstream might offer this possibility, since only 10 bcm of the Southstream's projected 30 bcm volume would be "fresh" gas from Russia -- or from Central Asia through Russia. The remaining 20 bcm would be gas volumes that used to be shipped through Ukraine and Belarus. Sporrer said, "We have often said we don't see Southstream as competition to Nabucco as long as Southstream does not tap into Nabucco sources." OMV HAS NOT SAID IT WILL PARTICIPATE IN SOUTHSTREAM ¶6. (C) Following up on a comment by the Charge that Russia's style is to make a declaration -- sometimes false for "active measures" purposes -- and then to try to figure out later how to make the declaration work, Sporrer heatedly said, "False is right, as demonstrated by Russia's announcement about OMV's participation in the Southstream." Although Gazprom made OMV an offer in August 2007 for its participation in Southstream, Sporrer maintained, there has been no discussion of that offer, and Austria has never given an official reaction. But, while there was no discussion between the two, Gazprom nonetheless has said that OMV is involved in the pipeline. ¶7. (C) COMMENT: Although energetic and enthusiastic, Sporrer is new to the game, and si it's sorth taking some of what he says with a grain of salt. OMV's proposal to work onshore faces substantial competition, including from a number of major petroleum firms that have been working on similar deals longer. Sporrer stressed at one point that his company is "big enough to be professional, but not so large that it is able to buy a country." OMV may be hoping that this point -- and OMV's willingness to work onshore under a "service contract -- will help to sweeten its onshore bid. END COMMENT. HOAGLAND