Identifier
Created
Classification
Origin
09ASHGABAT693
2009-06-05 05:40:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:  

TURKMENISTAN: THREE ENERGY OFFICIALS DESCRIBE

Tags:  PGOV EPET EINV TX 
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DE RUEHAH #0693/01 1560540
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FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 2913
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UNCLAS SECTION 01 OF 02 ASHGABAT 000693 

SENSITIVE
SIPDIS

SCA/CEN; EEB
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER

E.O. 12958: N/A
TAGS: PGOV EPET EINV TX
SUBJECT: TURKMENISTAN: THREE ENERGY OFFICIALS DESCRIBE
ENERGY DEVELOPMENT PLANS

UNCLAS SECTION 01 OF 02 ASHGABAT 000693

SENSITIVE
SIPDIS

SCA/CEN; EEB
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER

E.O. 12958: N/A
TAGS: PGOV EPET EINV TX
SUBJECT: TURKMENISTAN: THREE ENERGY OFFICIALS DESCRIBE
ENERGY DEVELOPMENT PLANS


1. (SBU) SUMMARY: The heads of Turkmenistan's Oil and Gas
Ministry and Gas and Oil Concerns met with SE/EE
Morningstar's delegation, and shared their understanding and
interpretation of Turkmenistan's energy development strategy.
The group reiterated the government's intention to use
foreign energy service companies to develop onshore fields in
a piecemeal fashion rather than employ an integrated
approach. The agency heads were receptive to the idea of
company proposals that contain financially beneficial
provisions outside of production sharing, and shared a few
examples they had recently considered. It will be up to
private companies to develop new types of service and
service-risk agreements that will make their operations here
more profitable. Government representatives are not going to
show them the way. END SUMMARY.

YOLOTAN--SHORT TERM INVESTMENT?


2. (SBU) On May 29, the SE/EE Morningstar delegation met
with the heads of Turkmenistan's Oil and Gas Ministry, State
Gas Concern, and State Oil Concern to get their take on
sectoral development and the potential for a larger foreign
company role. Oil and Gas Minister Annaguly Deryayev said
that the Turkmen government views the onshore investment
period as very short-term, leading it to use service
companies instead of major energy companies to develop
onshore resources. He assessed that $8-12 billion in
investment would be required to develop South Yolotan.
(NOTE: Although he provided no further information regarding
the investment figure, the number may be the government's
assessment of the amount of investment that will be required
to raise South Yolotan's production to 20 bcm per year, which
has been stated as a near-term goal to fulfill Turkmenistan's
obligation to deliver 17 bcm per year to the future
Turkmen-China pipeline. END NOTE.)

EXPOUNDING ON NEAR-TERM GOALS


3. (SBU) Turkmen State Gas Concern Chief Baymurat
Hojamuhammedov said his Concern was looking for service
companies and investment. He noted that they expected 3-4
years of investment returns. Foreign service companies, he
said, had the technology needed for onshore development, and
the Concern was currently negotiating with a range of

companies. He also noted that his Concern was playing an
active role in helping Turkmenistan to realize its export
pipeline diversification policy (but he did not expand).
Turkmen State Oil Concern Chief Orazdurdy Hajymuradov said
his Concern was responsible for producing oil only onshore.
The Oil Concern was focusing its work with foreign service
companies on boosting production at existing wells, to
include refurbishment and modernization of well structures.

EXPLORING ALTERNATIVE AGREEMENT STRUCTURES


4. (SBU) The delegation asked the trio if there was
interest in mutually beneficial deals with major energy
companies that were based on service, were long-term, and
perhaps involved joint operations. Perhaps such deals could
transition further down the road to include the companies
receiving royalties on the production or favorable tax
conditions, but would not involve any production sharing.
Would such offers be of interest to Turkmenistan?
Hojamuhammedov said the description sounded most like a
risk-service agreement. He noted that the Gas Concern had
been interested in a deal with the British-based BG Group
along these lines, but only the State Agency for the
Management and Use of Hydrocarbons has the necessary
authority to negotiate such a deal. He said that the Concern

ASHGABAT 00000693 002 OF 002


had considered other proposals that did not include
production sharing. By example, he said the Concern had
considered a deal with Shell to process sulfur at one point,
and Chevron was now in talks with the Concern.


5. (SBU) Hojamuhammedov said that he welcomes foreign
companies to come and propose unconventional deals. The
U.S.-based company, MI Swaco Drilling is in negotiations with
the Gas Concern now to develop a joint service company, and
another similar proposal is in consideration to develop a
joint gas processing facility. Hojamuhammedov indicated that
Turkmenistan has an overall strategy for developing the
sector, but that the strategy will be realized through
different companies fulfilling specific tasks. He added that
the Turkmen Gas Concern had hired the British consulting firm
Gaffney, Cline and Associates to advise the Concern on its
approach to gas development.


6. (SBU) COMMENT: The meeting underscored the government's
determination to develop onshore resources using only service
companies. It does appear that the country's energy agencies
are reviewing and considering a wide variety of creative
project proposals that fall outside of the narrow parameters
of typical service or service-risk agreements. Agency heads
are not, however, going to provide companies with guidance on
the elements of an agreement that would provide additional
benefit for companies and yet still be acceptable to the
government. It seems that foreign companies will have to
take the initiative to propose mutually acceptable
alternatives. END COMMENT.


7. (U) Special Envoy Morningstar cleared this cable.
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