AZERBAIJAN,S SOCAR DISCUSSES TURKMEN NEXT STEPS

C O N F I D E N T I A L BAKU 000719

SIPDIS

EUR FOR DAS BRYZA; EEB FOR STEVEN MANN

E.O. 12958: DECL: 07/30/2018
TAGS: PGOV PREL ENRG AJ TX
SUBJECT: AZERBAIJAN,S SOCAR DISCUSSES TURKMEN NEXT STEPS

Classified By: Classified By: Ambassador Anne E. Derse, Reasons 1.4 (b,
d).


1. (C) SUMMARY: In a July 16 conversation, SOCAR Marketing
Vice-President Elshad Nassirov and Eurasian Energy
Coordinator Steven Mann discussed prospects for an "early
gas" project getting Turkmen gas to Azerbaijan, with both
agreeing that the first, and key, step was the Turkmen
President making the political decision to sell gas to
Europe. END SUMMARY.


2. (C) On July 16 Eurasian Energy Coordinator Ambassador
Steven Mann met with SOCAR Marketing Vice-President Elshad
Nassirov to discuss Turkmenistan. Embassy Energy Officer was
also present.

EARLY GAS
--------------


3. (C) Ambassador Mann told Nassirov that both GOAJ
President Aliyev and GOTX President Berdimuhamedov have
indicated that they wish the USG to serve as a catalyst in
bringing about "early gas" from offshore Turkmenistani fields
(i.e. the Livanov field) to Azerbaijan. Mann handed Nassirov
a two-page paper, "Pathway to 'Early Gas' from Turkmenistan
and Beyond," listing steps the GOAJ and GOTX could take to
interconnect their offshore gas infrastructures, a copy of
which he had earlier presented to President Aliyev and which
he also intended to give to the Turkman President. Mann said
that much depended on whether GOTX offshore gas would have to
be taken back onshore for processing, or whether it could be
sent directly west. Nassirov mused that with GOTX gas,
Azerbaijan could sell eight bcm/a to Turkey.


4. (C) Nassirov said he had already received a copy of the
paper by the Presidential Apparat, and that he would share it
with SOCAR President Abdullayev when he returned the
following day. He himself thought the roadmap a good one,
but stressed that all bilateral progress in this regard
depended on Berdimuhamedov making the political decision to
sell gas to Europe. Mann agreed, saying that the key was to
educate Berdimuhamedov on how to develop the Turkmen energy
sector in conjunction with top-tier Western energy companies.



5. (C) Nassirov said there was no unified GOAJ view
concerning Turkmenistan. Existing bilateral problems are
Sardar-Kyapaz, bilateral border issues, and general Caspian
delimitation. There is a GOAJ consensus that bilateral
cooperation on developing offshore gas should begin, with the
assumption that the other problems will work themselves out
as bilateral cooperation increases. Azerbaijan is very
flexible as to the exact mechanism of gas development,
willing to let the GOTX decide where the interconnector
should go, who should build it, and who should be the
operator.

NEW SOCAR IDEAS
--------------


6. (C) Nassirov said that after Gazprom Alexei Miller's Baku
visit, he had thought of an idea to get GOTX gas westwards
without incurring Gazprom anger towards Berdimuhamedov.
Azerbaijan, Russia and Turkmenistan would cooperate on a
seven to eight bcm/a gas pipeline from Azerbaijan to Russia,
so that some GOTX offshore volumes could be sent to Russia
via Azerbaijan, saving Russia approximately USD 40 per
thousand cubic meters. Ambassador Mann thought the idea
worthy of further study, with the caveat that the goal was to
get large volumes of GOTX gas to Europe.


7. (C) Nassirov asked Mann what he thought of the idea of
Azerbaijan delivering SD2 volumes to Europe via Southstream,
with the proviso that Azerbaijan "kept control
of its gas." Mann replied that the idea was unwise and would
be opposed by the USG, as it would undercut the independence
of the region and cautioned that Russia can not be considered
a reliable commercial partner for Azerbaijan.


8. (C) Nassirov said that a SOCAR colleague in Tehran had
picked up rumors of Iran and Russia discussing a
cross-Caspian pipeline of their own, asking Mann if he had
heard anything in this regard. Mann hadn't.

GOAJ-GOTX CONFERENCE
--------------


9. (C) Nassirov was unenthused about the upcoming September
9-10 bilateral GOAJ-GOTX Exhibition and Conference to be held
in Baku, saying "it doesn't solve anything." Nassirov said
that while the GOAJ sought to invite Energy Ministers from
those countries involved with GUAM, Nabucco, TGI and TAP, the
GOTX was casting a far broader net, inviting companies and
officials from almost every Middle East and
Central Asian country, to include Saudi Arabia, Bahrain,
Kuwait, UAE, China, South Korea, Afghanistan, and companies
like Buried Hill. Mann agreed that the GOTX these days
seemed to have "conference fever." Nassirov said the head of
the GOTX delegation would be Vice-Premier Tagiev, since
Berdimuhamedov would not return to Baku until/unless
President Aliyev makes his State visit to Ashgabat.

SD2
--------------


10. (C) Nassirov told Mann that the GOAJ would not "rush to
proceed with" SD2 development if it could not secure transit
through Turkey, although he asked Mann not to share this news
with Turkey, since the GOAJ was seeking to convince Turkey
that the SD Consortium was seriously considering other
marketing options that did not involved
Turkish transit.

LNG FEASIBILTY STUDY
--------------


11. (C) Nassirov and Mann discussed the possibility of LNG
for SD2, both agreeing that rising prices necessitate
"another look" at this option. They also agreed that having
a high-profile signing ceremony of a USTDA LNG feasibility
study in Tbilisi in September, with SE Gray and Mann
attending, might be a good way of increasing the
pressure on Turkey to provide transit. Mann said that Turkey
should "negotiate hard," but ultimately must be convinced to
"make a deal that gets hydrocarbons to
Europe."


12. (U) Ambassador Mann has cleared this cable.
DERSE