TURKMENISTAN: PETROCHINA TO TAKE OVER AMU DARYA PROJECT

UNCLAS ASHGABAT 001117 SENSITIVE SIPDIS STATE FOR SCA/CEN; EEB; NEA/IR ENERGY FOR EKIMOFF/BURPOE/COHEN COMMERCE FOR EHOUSE E.O. 12958: N/A TAGS: EPET PGOV EINV ECON TX SUBJECT: TURKMENISTAN: PETROCHINA TO TAKE OVER AMU DARYA PROJECT REF: ASHGABAT 1071 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) A number of international media outlets reported this week that PetroChina will acquire assets from the Chinese National Petroleum Corporation (CNPC),PetroChina's parent company, including CNPC's share in the Amu Darya project. The Amu Darya project, or as the Turkmen call the Bagtyarlyk project, is a group of fields developed by CNPC under a production sharing agreement and is expected to supply up to 13 bcm of gas per year to the Central Asia - China pipeline (reftel). ¶3. (SBU) At the end of 2007, Italian ENI purchased the UK-based Burren Energy Company, which holds a license to develop the Nebitdag contractual territory under a production sharing agreement in Turkmenistan. The Turkmen government reacted negatively to the unexpected new ownership, with the State Agency for Management and Use of Hydrocarbon Resources demanding explanations from the Burren Energy management. In addition, the Turkmen State Migration Service reportedly denied entry visas to ENI staff as a result of the deal. The Turkmen Government maintained that Burren Energy should have coordinated and sought GOTX approval before selling to a new company. ENI eventually resolved the issue through special negotiations with the GOTX, but details of possible ENI concessions were not released. ¶4. (SBU) To date, there has been no official comment from the Government of Turkmenistan regarding the planned CNPC/PetroChina deal. But according to a Ministry of Oil and Gas official, the Turkmen Government will react calmly to the deal, as the Chinese companies have proved to be very skillful in doing business without displeasing the Turkmen Government. This official also asserted that the Chinese most likely vetted the deal with the Turkmen Government, learning from ENI's unpleasant experience in 2007. ¶5. (SBU) COMMENT: The Turkmen Government views the Amu Darya project more as a bilateral agreement, rather than a commercial deal between Turkmenistan and CNPC. Since the Chinese Government exercises full control of PetroChina and owns more than 85 percent of shares in CNPC, the Turkmen Government is unlikely to oppose the deal or create difficulties for its new Chinese partner. In addition, the Chinese have shown skill in managing their relationship with the Turkmen, and would not likely sanction any action that would damage their good standing. END COMMENT. CURRAN