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Cablegate: Turkmenistan: U.S. Firms Seeking to Enter Hydrocarbon

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PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1209/01 3111229
ZNR UUUUU ZZH
P 071229Z NOV 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9666
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
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RUEHAK/AMEMBASSY ANKARA PRIORITY 2951
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RUEHKO/AMEMBASSY TOKYO PRIORITY 0647
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UNCLAS SECTION 01 OF 02 ASHGABAT 001209

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EUR/RUS, EUR/CARC, EEB
PLEASE PASS TO USTDA DAN STEIN
COMMERCE FOR HUEPER
ENERGY FOR EKIMOFF/THOMPSON

E.O. 12958: N/A
TAGS: PGOV PREL EINV EPET RS AJ TX
SUBJECT: TURKMENISTAN: U.S. FIRMS SEEKING TO ENTER HYDROCARBON
SECTOR

1. (U) Sensitive but unclassified. Business Sensitive. Not for
public Internet.

2. (U) SUMMARY: Moderate reforms and a promise of a better
investment climate in Turkmenistan by the country's new leadership
have attracted renewed serious interest from U.S. oil majors,
including both old and potential new partners. A September 22-29
U.S. government-funded visit to the United States by high-level
Turkmenistani hydrocarbon officials helped promote some of these new
contacts. The majors can offer more advanced technology and serious
investment in support of Turkmenistan's own plans to expand its
current oil and gas production and export options. Oil companies
also bring to the table issues that would help improve
Turkmenistan's overall investment climate and petroleum legislation.
Many of these firms will be participating in the November 13-15
Turkmenistan International Oil and Gas Exhibition. This cable
offers post's understanding of the state of play of those firms
which have expressed renewed interest in Turkmenistan. END SUMMARY.


THE U.S. FIRMS: MARATHON OIL

3. (SBU) Marathon is the fourth-largest U.S.-based integrated oil
and gas company and the fifth-largest U.S. refiner. Marathon made
its first expression of interest in working in Turkmenistan during
the September visit to the United States by Turkmen hydrocarbon
officials. In particular, Marathon seems interested in bringing to
Turkmenistan a proprietary GTF (Gas-to-Fuel) technology that it is
currently developing. Although Turkmenistan has already received
several similar proposals from non-U.S. companies, Marathon voiced
its readiness to present advantages of its technology, including
lower cost and high conversion efficiency (around 90%). Marathon is
currently building a GTF demonstration plant in the United States.
In an effort to attract more foreign companies to develop offshore
Caspian blocks, State Agency has also requested the company to make
a presentation on its offshore experience and capabilities.
Marathon plans to visit Turkmenistan in the first week of December.

EXXONMOBIL

4. (SBU) In 1996 Mobil joined Monument Oil and Gas (UK) (NOTE:
Monument was ultimately taken over by Burren Energy, a UK firm. END
NOTE) and the Government of Turkmenistan in the PSA for an onshore
block located close to Balkanabat City (formerly Nebitdag). By the
end of 1998, ExxonMobil acquired a second onshore PSA --
Garashsyzlyk-2 field. In 1998 Exxon Turkmenistan entered into a
joint Technical Study Agreement to evaluate the potential for
exploration, development and marketing to China of gas from the
right bank of the Amu Darya River in eastern Turkmenistan.

5. (SBU) ExxonMobil decided to pull out of Turkmenistan in March
2002. The official reason for this decision was its disappointing
test drills. However, there is evidence that the company was forced
out due to ExxonMobil's involvement in developing the ACG
(Azeri-Chirag-Guneshli) fields in Azerbaijan. According to some
press reports, Mobil was invited by Turkmenistan in June 1998 to
negotiate an agreement that would allow it to work the Serdar field,
located in the disputed territory on the Turkmen-Azeri border.
Mobil said it would not begin work until the two states reached an
agreement over its ownership.

6. (SBU) Post does not know whether ExxonMobil has made a formal
proposal to the Government of Turkmenistan. During the September
hydrocarbon visit to the United States, ExxonMobil emphasized that
its improved seismic imaging, drilling technology and reservoir
modeling are very relevant to Turkmenistan's current needs. An
ExxonMobil team will attend TIOGE and hold meetings with
Turkmenistan's State Agency for Hydrocarbon Resources and with
Deputy Chairman of the Cabinet of Ministers for Oil and Gas
Tachberdi Tagyev.

ASHGABAT 00001209 002 OF 002

CONOCOPHILLIPS

7. (SBU) This company has conducted a series of negotiation rounds
with the State Agency for the Management and Use of Hydrocarbon
Resources. Post is not informed about the contract area
ConocoPhillips is negotiating with Turkmenistan. According to some
unofficial reports, ConocoPhillips will partner with Russia's Lukoil
in this project. A company representative of ConocoPhillips told an
embassy economic assistant that the firm is ready to sign a
production sharing agreement (PSA) with Turkmenistan during the
upcoming TIOGE event.

CHEVRON

8. (SBU) Chevron officials told the Charge in April that, although
it is ready to work on oil extraction in Turkmenistan's Caspian
basin, the company very much wants to become involved in developing
gas production in eastern Turkmenistan. In July Chevron proposed to
help develop the offshore Serdar field and resolve the dispute
between Turkmenistan and Azerbaijan. Later in September, Chevron
offered to form an onshore joint venture in the Amu Darya basin to
discover, develop and export sub-salt gas resources. The Executive
Director of the State Agency for the Management and Use of
Hydrocarbon Resources Bayrammyrat Myradov told the Charge October 2
that such an arrangement would be a "breakthrough solution" if it
goes through. Chevron is working to open an initial office in the
Ak Altyn Hotel.

AND A NOT-REALLY U.S. FIRM: BP/TNK-BP

9. (SBU) When the Charge first met with representatives of BP Oil
International in July, they told him BP wanted to enter Turkmenistan
and was working on identifying the most appropriate "vehicle" for
penetrating the Turkmenistani market. Options on the table included
BP, TNK-BP (a Russia-registered subsidiary of BP), or a combination
of BP and TNK-BP. At that time, the BP officials voiced some
reservation about TNK-BP which, they said, "is totally separate from
us." Since then, TNK-BP senior management have made a series of
trips to Turkmenistan and met with President Berdimuhamedov more
than once. In follow-up meetings with the Embassy, BP visitors have
probed whether the U.S. government in its energy policy is working
to "decrease the influence of Russia and Iran" in Turkmenistan.
They have also weighing whether a Russian company has advantages
over firms from other countries. TNK-BP i planning to open an
office in Ashgabat that will also be used by BP. It remains unclear
to us if both firms have equal interest in Turkmenistan, or if they
are hedging bets between themselves.

11. (SBU) COMMENT: U.S. hydrocarbon firms appear to be ahead of
most other foreign companies in their negotiations for joint
projects with Turkmenistan. U.S. firms' experience, demonstrated
technical expertise, and willingness to consider non-traditional and
innovative arrangements in order to address the Government of
Turkmenistan's reluctance to allow western firms a foothold in its
onshore gas fields seem to be beneficial in this regard. However,
Turkmenistani officials' lack of confidence in dealing with
international firms remains a potential problem that could cause the
still-fragile alliances under discussion to come unstuck. END
COMMENT

HOAGLAND

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