TURKMENISTAN: 195 GAS WELLS SHUT DOWN AS RESULT OF

UNCLAS SECTION 01 OF 02 ASHGABAT 000686 SENSITIVE SIPDIS STATE FOR SCA/CEN; EEB ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: N/A TAGS: EPET PGOV EINV TX RS SUBJECT: TURKMENISTAN: 195 GAS WELLS SHUT DOWN AS RESULT OF HALT IN GAS DELIVERY TO RUSSIA REF: ASHGABAT 0462 ¶1. (SBU) SUMMARY: A Turkmen official recently provided further details about the impact on Turkmenistan of the halt of gas exports to Russia. The information sheds light on the damage that the dispute may be inflicting on Turkmenistan's gas infrastructure. An astounding 195 gas wells have been shut down, and a mid-level Oil and Gas Ministry official assessed that the shutdown itself has likely damaged many of the wells, and that they will be costly to repair and make operational again. Some older wells may be irreparable. Given the likely cost of this dispute, and its seemingly prolonged nature, Turkmen officials may choose to make more details on the situation public to gain international support for their plight. END SUMMARY. ¶2. (SBU) Dr. Odek Odekov, Director of the Turkmen Geological Research Institute, said at the recent 2009 CIS Oil and Gas Conference in Paris that Turkmenistan had to shut down 195 wells to halt gas exports to Russia following the April 9 blast at the Central Asia - Center 4 (CAC-4) gas pipeline (reftel). Dr. Odekov also stated that Turkmenistan and Russia are now in the process of negotiating the payment of damages for the blast and might turn to international arbitration if the issue is not settled in the course of negotiations. (NOTE: Turkmenistan has already lost an estimated $1.8 billion, which is about 10 percent of the country's 2008 GDP, based on the estimated volume of gas not delivered since April 9. END NOTE) ¶3. (SBU) Reiterating the Government of Turkmenistan's official version of events, Dr. Odekov blamed Gazprom's subsidiary Gazpromexport for the blast. He emphasized that it usually takes up to three days to prepare the gas production and transportation facilities for a shut-off, whereas the Russians gave only one-day notice. Dr. Odekov also mentioned that the pipeline has been repaired and the flow could be resumed after the two sides come to an agreement. ¶4. (SBU) A mid-level Oil and Gas Ministry official told local pol/econ staff in a phone conversation that the numbers provided by Odekov are realistic and that the pipeline was fixed three or four days after the blast. The official also mentioned that it will require significant labor resources and time for Turkmenistan to restart the wells. Most of the gas fields supplying the CAC-4 gas export system have been under exploitation for more than twenty years, and the wells in those fields fill with water if the wells are shut down for a long time. To restart the wells, Turkmengaz engineers will need to carry out a costly process that takes about three days to clear the water out of the well, although the water-removal work can be conducted on a number of wells simultaneously. Also, it is possible that engineers will be unable to restart some low-pressure wells. ¶5. (SBU) COMMENT: Turkmenistan remains committed to its hard-line approach to the gas dispute, despite financial losses caused by the gas stoppage. There is insufficient information to estimate the cost of reversing the damage done to Turkmenistan's gas production and transportation infrastructure, but given the number of shut down wells, one can guess that the cost will be substantial. It is the first time that the Government of Turkmenistan has officially mentioned the number of wells it had to shut down because of the gas flow interruption. This gives us reason to believe that the government might reveal more information about the losses suffered if the dispute persists or becomes the subject ASHGABAT 00000686 002 OF 002 of arbitration proceedings. END COMMENT. MILES