GERMAN RWE SIGNS PSA WITH TURKMENISTAN

UNCLAS ASHGABAT 000908 SENSITIVE SIPDIS STATE FOR SCA/CEN; EEB PLEASE PASS TO USTDA DAN STEIN ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: N/A TAGS: EPET PGOV EINV TX IR SUBJECT: GERMAN RWE SIGNS PSA WITH TURKMENISTAN REF: A. Ashgabat 515 ¶B. Ashgabat 869 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: On July 16, RWE AG, a German energy company (and Nabucco pipeline project shareholder) and the Government of Turkmenistan signed a production sharing agreement (PSA) for Block 23 of the contractual territory located with Turkmenistan's Caspian Sea territorial waters. According to the agreement, RWE has received a six-year license to conduct exploration on Block 23 and will receive a 25-year license authorizing the company to commercially develop hydrocarbons on Block 23 if sufficient reserves are discovered during the exploration process. END SUMMARY. ¶3. (SBU) Block 23 is located in the southeastern part of Turkmenistan's Caspian Sea territorial waters about 40 kilometers north of Iran's land border and is adjacent to Turkmenistan's coast. It is triangle-shaped, with an area of about 940 square kilometers. According to official Turkmen sources, the Block has potential reserves, primarily of natural gas. An international company representative working in Turkmenistan told us that the Block is believed to be prospective mostly for gas and mentioned that there are doubts that discoveries of large hydrocarbon reserves will be made there. ¶4. (SBU) The PSA is part of a larger Memorandum on Long-term Cooperation (Memorandum) that RWE and the Government of Turkmenistan signed on April 16 (Ref A). Yagshygeldi Kakayev, Director of the State Agency for the Management and Use of Hydrocarbon Resources, and RWE AG's Chairman Georg Schning, signed the PSA in President Berdimuhamedov's presence in Turkmenbashy. Before the signing ceremony, President Berdimuhamedov discussed the implementation of the Memorandum's provisions in a meeting with J|rgen Grossman, RWE's Chairman of the Board, and Rudi Lamprecht, Director and founder of EWC East West Connect GmbH & Co. KG. The clear involvement of Mr. Lamprecht, who also serves as Executive Advisor to the CEO of Siemens AG and as Vice Chairman of the Board of Nokia Siemens Networks, in RWE's deals with the Turkmen government, confirms our assumption that RWE has been able to enter Turkmenistan's markets, in part, due to the good relations that Siemens, and particularly Mr. Lamprecht, has managed to build with high-ranking Turkmen officials (Refs A and B). ¶5. (SBU) COMMENT: The signing of the PSA is RWE's first serious step in implementing the Memorandum provisions. It took the company exactly three months to move from the Memorandum to the PSA, rather fast given conditions in Turkmenistan. The ceremony has not divulged details of the most intriguing Memorandum provision, which states that Turkmenistan and RWE will negotiate a long-term contract for the sale and purchase of Turkmen natural gas. There is still no information regarding the status of that contract. Block 23 itself will not make RWE a key energy partner of the Government. The only real indicator of RWE's importance to the Turkmen government will be the progress the company is able to make in negotiating the long-term contract for the sale and purchase of Turkmen natural gas. END COMMENT MILES