TURKMENISTAN: STATE HYDROCARBON AGENCY SUBMITS

UNCLAS SECTION 01 OF 03 ASHGABAT 001550 SENSITIVE SIPDIS STATE FOR SCA/CEN, EUR/ACE, EEB AID/W FOR EE/EA E.O. 12958: N/A TAGS: PGOV PREL EAID EPET TX SUBJECT: TURKMENISTAN: STATE HYDROCARBON AGENCY SUBMITS LIST OF AREAS FOR COOPERATION WITH USAID REF: ASHGABAT 1328 ASHGABAT 00001550 001.2 OF 003 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: On November 25, USAID received a detailed request for technical cooperation from the State Agency for Management and Use of Hydrocarbon Resources. The requested activities, which will be carried out within the framework of USAID's Economic Reforms to Enhance Competitiveness (EREC) project and the USAID- Chevron Global Development Alliance (GDA),will build financial and project management skills among oil and gas sector specialists and accountants, and assist the State Agency in addressing a range of other licensing, tender and procurement issues. USAID is reviewing the list to determine which areas it can respond to rapidly to capitalize on this opportunity. END SUMMARY. INITIAL MEETING RECALLED POSITIVE PAST COOPERATION ¶3. (U) In an October 20 meeting to discuss potential cooperation on introducing International Financial Reporting Standards (IFRS) with funding from the USAID- Chevron public-private partnership, State Agency for Management and Use of Hydrocarbon Resources (State Agency) Director Yagshygeldi Kakayev promised to provide a list of areas for cooperation with the State Agency after the Independence Day holidays (October 27- 28)(reftel). After initially delivering the letter directly to USAID/Deloitte on November 13, the State Agency agreed to resend the letter through formal channels, in accordance with standard Ministry of Foreign Affairs protocols. ¶4. (SBU) The translated text of the letter received by Embassy Ashgabat on November 25 follows. BEGIN TEXT Proposal of the State Agency for Management and Use of Hydrocarbon Resources of the Presidency of Turkmenistan to USAID on provision of services - It is proposed to conduct the training courses on project management for the specialists of the Agency (for the purposes of execution of controlling activities over the activities of Contractors during the conduct of Petroleum Operations) at the premises of local IFRS Training Center. - It is proposed to conduct training courses on international accounting for the specialists of the �A;Agency. - It is proposed to provide support on development of formats of financial reporting and regulations for compilation of these financial reports in accordance with the requirements of the Law of Turkmenistan "On Hydrocarbon Resources" and Production Sharing Agreement. - We hereby request you to organize the presentations and seminars with providing information on international ASHGABAT 00001550 002.2 OF 003 practice for procedures on issuance and formats of licensing/permissions documentation (procedures) for the execution of Petroleum Operations. - It is proposed to provide assistance in addressing the issue of reviewing currently existing Rules for the development of hydrocarbon deposits of Turkmenistan in the "golden" age of the Turkmen people taking into account problems and issues that have arisen during the management of projects. - It is proposed to provide assistance in the development of Unified rules and procedures for conducting tenders and/or competitive selection bids, which are set by the Agency for Contractors carrying out petroleum operations. - It is proposed to provide assistance in the development of the Regulations for conducting internal and external audits of petroleum operations, including through the engagement of foreign audit consultants. - It is proposed to provide assistance in the training of personnel on international audit. - It is proposed to provide assistance in the preparation of the Rules or Regulations for the inventory of property of the Agency, depreciated assets as part of the Agreements (Production Sharing Agreements),which have not been transferred to the Agency. - It is proposed to provide assistance in the development of the Rules or Regulations for the determination of composition and specifics of accounting and valuation of property, the right of ownership for which is transferred from the Contractor to the Agency according to the Law of Turkmenistan "On Hydrocarbon Resources". - It is proposed to provide assistance in obtaining information on international practice of controlling and evaluating the validity/reasonableness of expenses during the procurement of goods, equipment, materials and in carrying out of petroleum operations. END TEXT ¶5. (SBU) COMMENT: In the October 20 meeting, Kakayev stressed that the State Agency welcomed cooperation with USAID and spoke favorably of the extensive cooperation that USAID enjoyed in the 1990's with the State Agency's predecessor, the Competent Body. He welcomed assistance preparing the State Agency's own IFRS-compliant financial statements, as required by the new Hydrocarbons Law, even though the Ministry of Finance has not developed national accounting standards harmonized with international standards. Kakayev provided a contact person at the State Agency that has been responsive to USAID/Deloitte between meetings. ¶6. (SBU) COMMENT CONTINUED: The list of potential areas for cooperation moved quickly through the system to reach USAID. This reflects the State Agency's ability to navigate Turkmenistan's often cumbersome bureaucracy. USAID is currently reviewing the list of possible joint ASHGABAT 00001550 003.2 OF 003 activities, but might not have sufficient funding to support a comprehensive response. Given limited funds for economic growth activities in Turkmenistan, alliances with other private sector firms can be a source of additional funds. END COMMENT. ECKSTROM