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Cablegate: Af: Sheberghan Project On Schedule Despite Adb Pull Out.

VZCZCXRO9011
PP RUEHDBU RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #2852/01 2360935
ZNR UUUUU ZZH
P 240935Z AUG 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 9878
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0527
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4201
RUEHFR/AMEMBASSY PARIS 2978
RUEHML/AMEMBASSY MANILA 1604
RUEHBY/AMEMBASSY CANBERRA 0269
RUEHOT/AMEMBASSY OTTAWA 1389
RUEHNE/AMEMBASSY NEW DELHI 7110
RUEHJA/AMEMBASSY JAKARTA 0055
RUEHRL/AMEMBASSY BERLIN 2103
RUEHUL/AMEMBASSY SEOUL 0076
RUEHLO/AMEMBASSY LONDON 3749
RUEHKO/AMEMBASSY TOKYO 1948

UNCLAS SECTION 01 OF 02 KABUL 002852

SIPDIS

DEPT FOR SCA/FO, SCA/RA, AND SCA/A (A/S BOUCHER, GASTRIGHT,DEUTSCH)
DEPT PASS AID/ANE, OPIC
DEPT PASS USTR FOR GERBER AND KLEIN
DEPT PASS OPIC FORZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
CENTCOM FOR CG CFC-A, CG CJTF-76, POLAD, JICENT
NSC FOR AHARRIMAN
TREASURY FOR ABAUKOL AND BDAHL
MANILA PLEASE PASS ADB/USED
PARIS FOR OECD/ENERGY ATTACHE
OSD FOR SHIVERS, SHINN
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH
TOKYO ALSO FOR AID COUNSELOR AANENSON

SENSITIVE
SIPDIS

E.O. 12958 N/A
TAGS: ENRG EFIN EPET ETRD KPWR EAID PGOV AF
SUBJECT: AF: Sheberghan project on schedule despite ADB pull out.

REF: Kabul 1982 and previous

Sensitive but Unclassified
Manila see Action Request at para 5.

--------------------------------------------- ---------
Sheberghan Power Plant project back to original blueprint.
--------------------------------------------- ---------

1. (SBU) SUMMARY: The Asian Development Bank (ADB) has pulled out of
a proposed project for the comprehensive development of northwest
Afghanistan's most promising gas fields in the Amu Darya basin, near
the site of the proposed Sheberghan power plant (reftel), despite an
agreement to combine funds in a joint project. In a letter to USAID
dated July 31, ADB cited internal policies prohibiting cooperation
with Louis Berger Group, half of the joint-venture contractor
selected for the project. The joint project would have saved close
to USD 4 million for USAID and ADB in mobilization and supervision
costs. Despite the loss of these cost savings, the USAID project to
rehabilitate three gas fields for the exclusive purpose of fueling
the Sheberghan power plant is proceeding apace, with a contractor
expected in the field by early December.

--------------------------------------------- ---
Joint project proposal runs into technical snag.
--------------------------------------------- ---

2. (SBU) The proposed joint USAID-ADB project (reftel) to develop
the Amu Darya gas fields was born of Minister of Mines Ibrahim
Adel's frustration with the lack of ADB progress on a USD 24 million
loan, approved in 2003, for the rehabilitation of gas fields in the
Amu Darya basin and the rehabilitation of the pipeline connecting
Sheberghan and Mazar-i-Sharif. USAID, already committed to
rehabilitating three gas fields to identify gas reserves for the
proposed Sheberghan 100 MW electric power plant, saw the possibility
of reducing costs and spurring the ADB bureaucracy into speedier
action. The USG, encouraged by the Ministry of Mines, approached
ADB's representatives with a proposal in May 2007, and struck a
tentative agreement increasing the project's scope with ADB's
funds.

3. (SBU) In a letter dated July 31, 2007, ADB informed USAID that
following an internal review, ADB had determined it could not
participate in a combined project. The reason given was that Louis
Berger Group Inc., one of the two joint venture partners set to
implement the project, was "currently under sanction by ADB and, as
such, we have now confirmed that they are ineligible to participate
in ADB-financed activities." Although various scenarios were
examined to determine if this decision could be altered without
further delaying the start of the project, it was decided that USAID
would proceed with its Sheberghan project without ADB funds. We
understand that ADB plans to proceed with its USD 24 million project
as originally envisioned.

KABUL 00002852 002 OF 002

-------------------------
Project proceeding apace.
-------------------------

4. (SBU) USAID's contractor announced the USD 12 million project
tender on July 31, with a closing date of September 12. Of the 30
companies contacted by the contractor regarding the project, twelve
have expressed interest and are expected to submit a bid.
Additional funds may become available to increase the number of
wells to be explored and rehabilitated from three to seven. Barring
any unforeseen difficulties, USAID expects a contractor in the field
by early December. A report on the status of the wells and the
supply of natural gas available for the powering of the proposed
Sheberghan power plant is expected in May/June of 2008.

WOOD

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