Identifier
Created
Classification
Origin
09ASHGABAT815
2009-06-30 07:02:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:
TURKMENISTAN: CHINA GETS NO ADDITIONAL ONSHORE
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UNCLAS SECTION 01 OF 02 ASHGABAT 000815
SENSITIVE
SIPDIS
STATE FOR SCA/CEN; EEB
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: N/A
TAGS: EPET PGOV EINV TX
SUBJECT: TURKMENISTAN: CHINA GETS NO ADDITIONAL ONSHORE
PRODUCTION, EVEN FOR AN EXTRA BILLION DOLLAR LOAN
UNCLAS SECTION 01 OF 02 ASHGABAT 000815
SENSITIVE
SIPDIS
STATE FOR SCA/CEN; EEB
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: N/A
TAGS: EPET PGOV EINV TX
SUBJECT: TURKMENISTAN: CHINA GETS NO ADDITIONAL ONSHORE
PRODUCTION, EVEN FOR AN EXTRA BILLION DOLLAR LOAN
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: On June 24, the Governments of
Turkmenistan and China agreed that the annual volume of
Turkmen natural gas supplied to China will reach 40 bcm, which
is ten bcm more than the initially planned volume. They also
signed a number of documents related to the Turkmenistan-
Uzbekistan-Kazakhstan-China gas pipeline. Among them were gas
sale and purchase agreements and a four billion dollar loan
agreement. The two governments signed the documents during
the visit of Chinese Vice Premier Li Keqiang to Turkmenistan.
END SUMMARY
3. (SBU) Turkmengaz and the State Agency for Management and
Use of Hydrocarbon Resources (State Agency) signed the gas
sale and purchase agreements on behalf of Turkmenistan, and
the Chinese National Petroleum Corporation (CNPC),
PetroChina Company Limited, and Chinese National Petroleum
Corporation International Ltd. (CNPCI) signed on behalf of
China. The agreement signed by Turkmengaz and CNPC envisages
deliveries of 10 bcm of gas per year. State-controlled
Turkmen media did not specify the volume of gas envisaged in
the agreement signed by the State Agency and PetroChina and
CNPCI. (NOTE: On July 17, 2007, Turkmengaz signed a gas
sales and purchase agreement with CNPC as part of the
intergovernmental agreement of April 3, 2006 for construction
of the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline,
committing to deliver 30 bcm of Turkmen natural gas per year
to China. This earlier agreement reportedly provided for the
sale of 17 bcm per year, which would be produced from the
Malay and Uchajy gas fields. The remaining 13 bcm per year
would come from the Bagtyarlyk contractual territory operated
by CNPC under a production sharing agreement signed in 2006.
END NOTE.)
4. (SBU) On June 24, Turkmengaz also signed a four billion
dollar loan agreement with the State Development Bank of
China. Previously, state media had reported that Deputy
Chairman for Oil and Gas Tagiyev had negotiated a three billion
dollar loan during his visit to China in early June to develop
the South Yoloten gas field.
5. (SBU) COMMENT: At this point, it looks like the extra ten
bcm per year to increase annual deliveries from 30 bcm to 40
bcm will come from the South Yoloten field and that a Chinese
company, most likely CNPC, will be engaged to prepare the
field for exploitation. Based on the fact that CNPC signed
the 10 bcm per year gas sale and purchase agreement with
Turkmengaz and not with the State Agency, it is likely that
the Chinese will not receive a production sharing agreement to
develop the South Yoloten gas field, but rather will be hired
as a contractor to drill wells and build the required
infrastructure, after which Turkmengaz will take over as the
field operator.
6. (SBU) COMMENT CONTINUED: There have been no reports about
why the loan amount was increased from three billion to four
billion dollars. The most obvious reason seems to be that the
two sides decided that three billion dollars would not be
enough to develop South Yoloten to the point where it could
produce 10 bcm annually and decided to increase the amount of
loan. There is another possibility: on June 25, the day
after the loan agreement was signed, Turkmengaz officially
extended for one month the deadline for tender proposals to
construct the East-West Pipeline. Taking into account the
postponement and that the estimated cost of the new pipeline
is reportedly about one billion dollars, the extra billion
might be used to finance the construction of the pipeline.
ASHGABAT 00000815 002 OF 002
While it would not seem to make sense for China to provide a
loan for a pipeline that would take Turkmen gas westwards,
Chinese financing would ensure that the tender is not awarded
to Gazprom (but rather to CNPC),thus diminishing the Russian
presence in the Turkmen energy sector. Also, if the flow was
reversed, the new pipeline could deliver Caspian gas, due to
start flowing in 2010, eastward to the China-bound pipeline.
END COMMENT.
MILES
SENSITIVE
SIPDIS
STATE FOR SCA/CEN; EEB
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: N/A
TAGS: EPET PGOV EINV TX
SUBJECT: TURKMENISTAN: CHINA GETS NO ADDITIONAL ONSHORE
PRODUCTION, EVEN FOR AN EXTRA BILLION DOLLAR LOAN
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: On June 24, the Governments of
Turkmenistan and China agreed that the annual volume of
Turkmen natural gas supplied to China will reach 40 bcm, which
is ten bcm more than the initially planned volume. They also
signed a number of documents related to the Turkmenistan-
Uzbekistan-Kazakhstan-China gas pipeline. Among them were gas
sale and purchase agreements and a four billion dollar loan
agreement. The two governments signed the documents during
the visit of Chinese Vice Premier Li Keqiang to Turkmenistan.
END SUMMARY
3. (SBU) Turkmengaz and the State Agency for Management and
Use of Hydrocarbon Resources (State Agency) signed the gas
sale and purchase agreements on behalf of Turkmenistan, and
the Chinese National Petroleum Corporation (CNPC),
PetroChina Company Limited, and Chinese National Petroleum
Corporation International Ltd. (CNPCI) signed on behalf of
China. The agreement signed by Turkmengaz and CNPC envisages
deliveries of 10 bcm of gas per year. State-controlled
Turkmen media did not specify the volume of gas envisaged in
the agreement signed by the State Agency and PetroChina and
CNPCI. (NOTE: On July 17, 2007, Turkmengaz signed a gas
sales and purchase agreement with CNPC as part of the
intergovernmental agreement of April 3, 2006 for construction
of the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline,
committing to deliver 30 bcm of Turkmen natural gas per year
to China. This earlier agreement reportedly provided for the
sale of 17 bcm per year, which would be produced from the
Malay and Uchajy gas fields. The remaining 13 bcm per year
would come from the Bagtyarlyk contractual territory operated
by CNPC under a production sharing agreement signed in 2006.
END NOTE.)
4. (SBU) On June 24, Turkmengaz also signed a four billion
dollar loan agreement with the State Development Bank of
China. Previously, state media had reported that Deputy
Chairman for Oil and Gas Tagiyev had negotiated a three billion
dollar loan during his visit to China in early June to develop
the South Yoloten gas field.
5. (SBU) COMMENT: At this point, it looks like the extra ten
bcm per year to increase annual deliveries from 30 bcm to 40
bcm will come from the South Yoloten field and that a Chinese
company, most likely CNPC, will be engaged to prepare the
field for exploitation. Based on the fact that CNPC signed
the 10 bcm per year gas sale and purchase agreement with
Turkmengaz and not with the State Agency, it is likely that
the Chinese will not receive a production sharing agreement to
develop the South Yoloten gas field, but rather will be hired
as a contractor to drill wells and build the required
infrastructure, after which Turkmengaz will take over as the
field operator.
6. (SBU) COMMENT CONTINUED: There have been no reports about
why the loan amount was increased from three billion to four
billion dollars. The most obvious reason seems to be that the
two sides decided that three billion dollars would not be
enough to develop South Yoloten to the point where it could
produce 10 bcm annually and decided to increase the amount of
loan. There is another possibility: on June 25, the day
after the loan agreement was signed, Turkmengaz officially
extended for one month the deadline for tender proposals to
construct the East-West Pipeline. Taking into account the
postponement and that the estimated cost of the new pipeline
is reportedly about one billion dollars, the extra billion
might be used to finance the construction of the pipeline.
ASHGABAT 00000815 002 OF 002
While it would not seem to make sense for China to provide a
loan for a pipeline that would take Turkmen gas westwards,
Chinese financing would ensure that the tender is not awarded
to Gazprom (but rather to CNPC),thus diminishing the Russian
presence in the Turkmen energy sector. Also, if the flow was
reversed, the new pipeline could deliver Caspian gas, due to
start flowing in 2010, eastward to the China-bound pipeline.
END COMMENT.
MILES