TURKMENISTAN: CHEVRON STILL PUSHING FOR A DEAL

C O N F I D E N T I A L ASHGABAT 001494 SIPDIS STATE FOR SCA/CEN; EEB; ENERGY FOR EKIMOFF/BURPOE/COHEN COMMERCE FOR EHOUSE E.O. 12958: DECL: 11/23/2019 TAGS: EPET ECON PGOV EINV BTIO TX SUBJECT: TURKMENISTAN: CHEVRON STILL PUSHING FOR A DEAL REF: ASHGABAT 1388 Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d). ¶1. (C) On the margins of the annual Turkmenistan International Oil and Gas Exhibition (TIOGE),Chevron representatives discussed the company's current plans for reaching an energy deal with the Turkmen. The local Chevron representative told Charge that the recent GOTX proposal to have Chevron take over gas processing from Gazprom (reftel),turned out to be a small petrochemical project that would utilize between one and two billion cubic meters (bcm) of gas, and Chevron was simply not interested. While the GOTX is pursuing petrochemical projects with several foreign companies, but Chevron hopes that the GOTX will accept its proposal to partner in upstream exploration and production. The Chevron rep opined that recent Turkmen overtures to bring Chevron in on a smaller project first were indicative of the GOTX's "start small and stay small" policy for foreign companies. He stressed that Chevron would like to be part of the "full value chain" for gas; hence, Chevron would continue to push for an onshore gas development deal. ¶2. (C) On November 13, the Chevron rep told Charge that Chevron was following up on a letter from Turkmengaz Head Nura Muhammedov which indicated that Turkmengaz looked forward to furthering its relationship with Chevron. The Chevron rep also had a two-hour meeting with the Head of the Turkmen State Agency for the Management and Use of Hydrocarbon Resources Yagshygeldi Kakayev, adding that most meetings with Kakayev only last a half hour. He noted that Kakayev was more relaxed and more positive than he had been in other meetings, but he fell short of offering a deal to Chevron, beyond the recent petrochemical idea. ¶3. (C) The Chevron rep asserted that the decreased global demand for gas is a concern for the GOTX, which is hesitant to enter any long-term gas partnerships if the global demand for gas is on the decline. At the same time, he added, Chevron is trying to convince the GOTX to "look a few years down the road," and invest in projects that will allow the GOTX to step up gas and oil production at the time when demand will increase. He stressed that Chevron's market projections for 2012-2015 show gas consumption returning to 2008 levels. As a result, the GOTX needs to partner with foreign companies like Chevron to be able to meet the projected demand over the next few years. ¶4. (C) According to the Chevron rep, the GOTX seems content to produce between 45-50 bcm of gas each year, and revenues from these volumes would adequately support the state budget, with plenty to spare. He stressed that the GOTX is not in a rush to enter deals with foreign companies, especially since China and Iran plan to purchase up to 65 bcm of gas collectively by 2013, even if Russia chooses not to resume buying Turkmen gas. He underscored that sending 50 bcm of gas into the global market does not make Turkmenistan a major gas player, despite the GOTX's insistence that it is. ¶5. (C) COMMENT. Chevron reps were not that excited about the Turkmen offer to partner with Chevron on a petrochemical project, admitting that they initially misunderstood the GOTX's proposal. While Chevron will examine any potential projects the GOTX might suggest, the company appears to be digging its heels in for an onshore deal. At the same time, the GOTX continues to repeat its policy that foreign companies should either start small and/or compete for an offshore block in the Caspian, before any expectation of working onshore. END COMMENT. CURRAN