VZCZCXRO6635
RR RUEHLN RUEHVK RUEHYG
DE RUEHDBU #0935 1731014
ZNR UUUUU ZZH
R 221014Z JUN 07
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 0512
RUCPDOC/USDOC WASHDC 0171
INFO RUEHBJ/AMEMBASSY BEIJING 1964
RUEHBS/USEU BRUSSELS 1230
RUEAIIA/CIA WASHDC
RUCNCIS/CIS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEHDBU/AMEMBASSY DUSHANBE 2287
RHMFISS/HQ USCENTCOM  MACDILL AFB FL
RUEHIL/AMEMBASSY ISLAMABAD 2169
RUEHBUL/AMEMBASSY KABUL 2156
RUEHML/AMEMBASSY MANILA 0162
RUEHNE/AMEMBASSY NEW DELHI 2133
RHEHAAA/NSC WASHINGTON DC
RUEHFR/AMEMBASSY PARIS 1615

UNCLAS DUSHANBE 000935 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN 
COMMERCE FOR ITA/RISD/DSTARKS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV EIND TI PGOV
SUBJECT: CANARGO PROSPECTS FOR GAS IN DUSHANBE 
 
 
¶1.  (SBU) Summary.  The heads of U.S. oil and gas prospecting 
company CanArgo recently visited Tajikistan in order to push the 
Tajik government to sign a contract on development of oil and 
gas fields in the southern Kulob region.  CanArgo has signed a 
protocol with the government on development of these fields, and 
is now seeking a production sharing agreement.  While the gas 
fields have real potential, CanArgo has discovered that the 
Tajik tax code prohibits payment of taxes in-kind, precluding 
the kind of production sharing agreement they had hoped to sign. 
 End Summary. 
 
¶2.  (SBU) The president of CanArgo Energy Corporation, Dr. David 
Robson, flew EconOffs to Kulob June 21 to check out a gas field 
and a gas processing facility.  Robson, a geologist, discussed 
technical details with local engineers, and seemed satisfied at 
the prospects.  While the gas contains 15% sulfur, the 
Canadian-built 10-year old gas cleaning facility produces clean 
gas.  As a goodwill gesture, CanArgo plans to bring in a 
portable 4MW gas-powered generator that would provide 
electricity to the Kulob region this winter.  (Kulob typically 
demands 40-60MW, but supplies fell to 20MW last winter.)  The 
mayor of Kulob seemed very pleased at this prospect, and looked 
forward to cooperating with CanArgo. 
 
¶3.  (SBU) CanArgo representatives described moving forward on 
the legislative fix necessary for the production sharing 
agreement as "one step forward, two steps back."  They are 
working principally with the State Committee on Investments, and 
with Minister of Energy and Industry Gulov, but they have the 
sense no one is pushing from the Tajik side.  We put them in 
touch with USAID-funded Pragma which is providing legal advice 
to the Investments Committee on making Tajik legislation more 
amenable to investment.  CanArgo hopes that Deputy Prime 
Minister Ghulomov will push the whole project along, but is 
afraid Gazprom's influence with the government may prove to be 
problematic for CanArgo. 
 
¶4.  (SBU) CanArgo is spinning off its Central Asian company, 
Tethys Petroleum Limited, next week.  Tethys will be listed on 
the Canadian stock exchange, and it is Tethys that would be 
working here (they have about 8 million USD to invest if things 
work out).  We told them they would need to re-qualify with the 
Department of Commerce as an American company based on ownership 
for us to be able to do direct advocacy.  If that happens, we 
told them we would be happy to raise specifics with government 
officials, both orally and in writing, as needed. 
 
¶5.  (SBU) CanArgo is thinking about whether a government decree 
on the production sharing agreement would be enough of a 
guarantee to start work, with the legislation to come later.  Of 
course, the Tajik side would like CanArgo to get to work right 
away, and settle the details about production sharing after 
production has begun.  Who would pay for any gas produced is 
also up in the air, as any near-term production would go to the 
Tajik market.  CanArgo has made several trips to Tajikistan, 
however, and have shown that their interest in developing gas in 
Tajikistan is genuine. 
JACOBSON