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P 010805Z MAR 08
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UNCLAS SECTION 01 OF 02 ASHGABAT 000291 
 
SIPDIS 
 
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: PGOV PREL EPET AJ TX
SUBJECT:  TURKMENISTAN:  PETRONAS PLANNING FOR EXPANDED 
PRODUCTION? 
 
REF: A. ASHGABAT 0044 
     ¶B. ASHGABAT 0254 
 
1,  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  During a February 23 meeting, Petronas' 
country manager told EmbOff that his company may seek to fund 
the Turkmenistan portion of the Caspian littoral pipeline. 
Although he continues to maintain that Petronas is planning 
to produce only 10 bcm of natural gas per year, he said the 
company is planning to build a 48-inch pipeline -- with the 
potential to transport 20 bcm of gas per year -- from Block I 
to shore.  Whether this is because Petronas is hoping to 
reach agreement with Canadian petroleum firm Buried Hill to 
transport gas from Buried Hill's holding in block III to 
shore (a possibility which Buried Hill's country manager 
separately told Post he is considering), or Petronas is 
planning to increase its production, is not yet clear.  END 
SUMMARY. 
 
¶3.  (SBU) During a February 23 lunch to introduce Petronas' 
new country manager, Mohammed Ridza M. Shariff, the departing 
country manager, Suleiman Abdullah, indicated that, contrary 
to what he told Embassy personnel in January (Ref A), the new 
Caspian littoral (Prikaspiskyy) natural gas pipeline will 
follow the old Central Asian-Center III (CAC-III) pipeline 
route.  Turkmenistan is planning an all-new construction for 
its portion of the pipeline that Russia, Kazakhstan and 
Turkmenistan agreed to build during a May 2007 summit, since 
refurbishing the old CAC-III pipeline would cost two-thirds 
of the price of a new one.  Petronas may fund the 
construction of Turkmenistan's portion of the new Caspian 
littoral pipeline.  By contrast, he alleged, there has been a 
real struggle to line up financing for the Kazakhstan portion 
of the Caspian littoral pipeline. 
 
¶4.  (SBU) In the meantime, the company has decided to build a 
48-inch pipeline from Block I to shore and is currently 
surveying the proposed route.  It expects to put out a 
construction tender in about three months.  Suleiman also 
confirmed that Petronas has finished assembling a new 
production platform, which is not yet operational, due to 
Turkmenistan's unusually poor weather in January.  (NOTE:  A 
U.S. official with detailed knowledge of Caspian energy notes 
there is currently no barge in the Caspian that could lay 
48-inch pipe.  The largest capacity is 26-inch.  END NOTE.) 
 
BURIED HILL NOT IN TOUCH WITH PETRONAS 
 
¶5.  (SBU) Abdullah claimed not to be surprised by the news 
that the Canadian firm, Buried Hill Energy, has received a 
contract to work the disputed Block III (Ref B).  He said he 
has heard that the Azeri government did not oppose Buried 
Hill's seismic imaging activities and suggested that the 
decision to award Buried Hill the contract may be part of a 
possible larger plan to exploit Block III's resources being 
worked out between the governments of Turkmenistan and 
Azerbaijan.  Under this plan, Turkmenistan -- through Buried 
Hill -- would have unhindered access to the Serdar field, 
while Azerbaijan would continue to work the 
Azeri/Chirag/Guneshli fields through BP. 
 
¶6.  (SBU) But, he said, Buried Hill has not been in touch 
with Petronas yet, including to discuss the possibility of 
transporting any associated gas that it might hit in Block 
III onshore through a link-up to Petronas' pipeline from its 
Block I rigs, though transporting its gas to shore through 
Petronas' pipeline would be cheaper than building its own 
 
ASHGABAT 00000291  002 OF 002 
 
 
pipeline.  Shariff added that Petronas's pipeline would have 
excess capacity and could carry gas from Block III, if Buried 
Hill reaches an agreement with Petronas.  Abdullah also 
confirmed comments by Buried Hill's country manager that all 
non-Iranian rigs -- including the Maersk Explorer -- 
currently in the Caspian Sea are booked up for several years 
to come.  While Buried Hill may have its seismic imaging 
complete in a few months -- and may be finished already if it 
has only been carrying out 2-D seismic imaging -- the only 
way it can begin drilling by the end of the year is if it 
hires an Iranian rig or imports a rig from elsewhere, and 
rigs are not in plentiful supply. 
 
¶7.  (SBU) COMMENT:  Petronas has stated several times that it 
faces real problems in terms of finding solutions for 
exporting its gas, and it was willing as recently as January 
to build its own pipeline north.  Its alleged willingness to 
pay a part or all of the costs for the Turkmenistan segment 
of the new Caspian littoral pipeline would make sense if it 
feels the pipeline will resolve its own gas transportation 
issues.  More interesting is Petronas' stated decision to 
build a 48-inch pipeline -- which Abdullah confirmed can 
carry up to 20 bcm of gas per year -- between Block 1 and the 
shoreline.  In the past, Abdullah has suggested Petronas' 
natural gas production will reach at its peak only 10 bcm per 
year.  If this is so, the pipeline's excess capacity could 
mean that Petronas is either planning to increase its 
production, or wants to reach an agreement to transport 
Buried Hill's gas to shore.  END COMMENT. 
 
BIO NOTE 
 
¶8.  (SBU) Mohammed Ridza M. Shariff has worked for Petronas 
for 15 years, but never before outside of Malaysia.  While he 
did not say much during the lunch, letting Abdullah do most 
of the talking, he seemed to be more thoughtful and candid 
than his more garrulous colleague. 
HOAGLAND