TURKMENISTAN: WHITE STREAM REPRESENTATIVE PITCHES

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 001332

SIPDIS

STATE FOR SCA/CEN; EEB; NEA/IR
ENERGY FOR EKIMOFF/BURPOE/COHEN
COMMERCE FOR EHOUSE

E.O. 12958: DECL: 10/23/2019
TAGS: EPET ECON PGOV EINV BTIO TX
SUBJECT: TURKMENISTAN: WHITE STREAM REPRESENTATIVE PITCHES
PROJECT

REF: ASHGABAT 947

Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d).


1. (C) SUMMARY: A White Stream pipeline representative was
in Ashgabat this week to pitch the project to GOTX officials.
White Stream is a private gas pipeline from Georgia to
Romania that its proponents claim is an alternative route for
deliveries of Azerbaijani and Turkmen gas Europe. The rep
opined that White Stream is the "perfect compliment" to
Nabucco and would only cost about $4 billion to construct.
The pipeline project rep asserted that after a gas pipeline
explosion on Turkmen territory in April and Russia's
subsequent refusal to purchase Turkmen gas, the GOTX is
moving to become Europe's major direct gas supplier, a
position Russia currently enjoys. Major obstacles remain
before White Stream could come to fruition, however,
including the completion of a trans-Caspian pipeline, the
completion of the Turkmen East-West pipeline and Caspian
delimitation disputes among littoral countries. Moreover,
several experts believe that White stream unnecessarily
competes with the Nabucco pipeline and that White Stream does
not have the necessary financial and political backing
needed. END SUMMARY.


2. (C) On October 19, Economic Officer met with Director of
Corporate Development for GUEU-White Stream Pipeline Company
and Georgian national Giorgi Vashakmadze. Vashakmadze
explained that White Stream is a pipeline project that would
ultimately transport gas from Azerbaijan and the Caspian
region directly to Romania, Ukraine and markets in Central
and Eastern Europe. The pipeline would be divided into two
parts: a 1100 km subsea route through the Black Sea from
Georgia to Romania, and an additional 630 km leg from Georgia
to Crimea in Ukraine (Note: this pipeline leg to Ukraine is
often referred to as White Stream 2. End note.) Project
promoters tout the pipeline as a means for initially
transported 8 billion cubic meters (bcm) of gas up to 32 bcm
with increased capacity.

WHITE STREAM REP CLAIMS GOTX READY TO SUPPLY GAS


3. (C) The White Stream representative told us he was in
Ashgabat for meetings with Deputy Chairman for Oil and Gas
Hojamuhammedov and Head of the State Agency for the
Management and Use of Hydrocarbon Resources Kakayev with the
goal of securing a commitment of gas supplies for the White
Stream project. Vashakmadze stated that the meetings went
very well, especially since the GOTX is "looking toward
Europe" to offload its gas supplies. He asserted that both
Hojamuhammedov and Kakayev told him that Europe would be the
most reliable customer for Turkmenistan compared to Russia,
China, and Iran. As a result, Vashakmadze added, White
Stream is an attractive option for the Turkmen and if it were
not, he would not have gotten the meetings with the country's
"two most powerful energy brokers."


4. (C) Vashakmadze claimed that the European Commission's
(EC) open support for White Stream resonates well with the
GOTX, and he received assurances from GOTX officials (not the
President) that Turkmen gas supplies for White Stream would
be available, as soon as the project comes online. He opined
that the Turkmen were still very upset with the Russians for
the pipeline explosion in April and the subsequent gas row
over price, which breathed new life in to alternative transit
routes for gas intended for Europe. He was confident that the
Turkmen viewed both Nabucco and White Stream as essential
components of the EC's Southern Corridor plan.

BUT HOW DOES ONE GET TURKMEN GAS TO WHITE STREAM?

ASHGABAT 00001332 002 OF 003




5. (C) However, getting the gas all the way from Turkmenistan
to White Stream is problematic for many reasons. In order to
get gas from Turkmenistan's eastern gas fields to gas
compressors in western Turkmenistan, and eventually to
Turkmenistan's border on the Caspian Sea, the East-West
Pipeline (or the Turkmenistan-Kazakhstan-Russia Pipeline)
will need to be constructed. Initially, Gazprom was
reportedly going to finance the construction of the East-West
pipeline, but the GOTX turned down Gazprom's offer due to
Gazprom's precondition that the East-West pipeline be
exclusively dedicated to the transportation of gas from
Turkmenistan's eastern gas fields to the Littoral or
Prekaspiyski Pipeline, planned to run from Turkmenbashi to
the Russian gas hub in Alexandrov Gay. Afer reportedly
turning down Gazprom's offer to finance the East-West
Pipeline, the GOTX announced an international tender for the
construction of the East-West pipeline in March 2009, with a
bidding deadline of July 27. To date, the GOTX has failed to
award a tender for the East-West Pipeline. If the East-West
Pipeline is not constructed, then White Stream could not
count on Turkmen gas supplies.


6. (C) Even if the East-West Pipeline gets built, Turkmen gas
would have to make its way across the Caspian Sea. To date,
movement on a trans-Caspian pipeline has been stymied by
delimitation disputes among littoral states. Chief among the
disputes is the hydrocarbon-rich fields that both
Turkmenistan and Azerbaijan are claiming known as "Serdar" to
the Turkmen and "Kyapaz" to the Azerbaijanis (reftel).
Resolving the complicated delimitation disputes would most
likely have to proceed any trans-Caspian pipeline project.
The White Stream rep stated that he had indications from
Azaerbaijani and Turkmen officials that Caspian Sea
delimitation dispute is actually closer to being resolved
than most people think; he did not elaborate on his sources,
however.


7. (C) If both the East-West and trans-Caspian pipelines are
constructed, then that leaves the actual construction of
White Stream in the Black Sea. To date, Blue Stream already
transports Russian gas to Turkey through the Black Sea, and
Russia continues to promote South Stream, which would send
Russian gas to Bulgaria then on to the rest of Europe,
competing with Nabucco and White Stream. Vashakmadze
dismissed notions that there might not be enough room in the
Black Sea, adding that the project would only cost $4 billion
making it an attractive way for the EU to diversify its
supplies.

WILL WHITE STREAM COMPETE WITH NABUCCO?


8. (C) Vashakmadze said that he spends a large amount of his
time explaining that White Stream does not compete with
Nabucco, but it compliments it. He added that the pipeline
leg to Crimea, or White Stream 2 does something that Nabucco
does not do--provides a way to get Central Asian gas to
Ukraine. Given Russia's pressure on Georgia and Ukraine, he
added, White Stream is a very timely energy project.
Vashakmadze asserted that the EC mentions Nabucco and White
Stream in the same breath as part of its Southern Corridor
plan. He stressed that last year's gas row between Russia
and Ukraine left European countries without gas, and renewed
global interest in Nabucco and White Stream. He underscored
that there is plenty of Central Asian gas for both projects
to form new supply routes to the EU. Vashakmadze admitted
that Nabucco has tremendous financial backing, but was
confident that White Stream would continue to pick up
investors, especially since more people are understanding the
importance of White Stream 2.

ASHGABAT 00001332 003 OF 003




9. (C) COMMENT. The White Stream representative's meetings
with high-level GOTX officials reflects the GOTX's plans to
attract additional customers for its gas. At the same time,
the GOTX has no current plans to divert from its policy that
Turkmenistan sells its gas at its border, leaving large
pipeline projects up to would-be customers. Adding a
European-customer base is attractive to the Turkmen.
Nevertheless, White Stream is still misunderstood in
Turkmenistan, and often seen as a distraction to Nabucco.
The Turkmen seem to have no problem pledging large gas
amounts to pipelines that have not been built, as the Turkmen
can gain political good will from the Europeans with little
risk while the pipelines are still projects and not
realities. If the GOTX does not increase its production
capacity, however, it will not be able to produce the volumes
needed for more and more pipeline projects. In addition,
Turkmenistan's current dependence on Russia as its largest
gas customer will continue to affect its participation in
pipeline projects that could ultimately send large volumes of
gas away from Russian. END COMMENT.
CURRAN