VZCZCXRO9744
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHAH #0728/01 2041148
ZNR UUUUU ZZH
P 231148Z JUL 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9038
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHRL/AMEMBASSY BERLIN PRIORITY 0402
RUEHLM/AMEMBASSY COLOMBO PRIORITY 0436
RUEHKA/AMEMBASSY DHAKA PRIORITY 0458
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 2146
RUEHBUL/AMEMBASSY KABUL PRIORITY 0895
RUEHLO/AMEMBASSY LONDON PRIORITY 0446
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0943
RUEHFR/AMEMBASSY PARIS PRIORITY 0375
RUEHKO/AMEMBASSY TOKYO PRIORITY 0297
RHMFIUU/CDR USCENTCOM MACDILL AFB FL//CCJ2/HSE/CCJ5// PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHINGTON DC//DHO-2/REA/NMJIC-J2// PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

UNCLAS SECTION 01 OF 04 ASHGABAT 000728 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/RUS, EUR/CARC, EEB, DRL 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM EPET EINV RS CH AZ TX
SUBJECT: TURKMENISTAN ENERGY: MYRADOV AVERS AMU DARYA BASIN 
NOT CLOSED TO U.S. ENERGY FIRMS 
 
REF: A. ASHGABAT 0699 
     ¶B. ASHGABAT 0690 
     ¶C. ASHGABAT 0559 
     ¶D. ASHGABAT 0550 
     ¶E. ASHGABAT 0326 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  At an hour-long meeting on July 12 with 
Executive Director of Turkmenistan's State Agency for 
Management and Use of Hydrocarbon Resources Bayrammyrat 
Myradov, SCA Principal Deputy Secretary Steven R. Mann, EUR 
DAS Matt Bryza, and EEB Rob Garverick emphasized the benefits 
of the "Western model" for long-term hydrocarbon development, 
and the need to send a signal to the European market that 
Turkmenistan intends to become a trustworthy supplier of oil 
and gas.  Mann advocated that Turkmenistan move to the next 
stage -- "serious talks with serious Western companies." 
Myradov repeatedly stated his State Agency is eager to talk 
with all companies about hydrocarbon exploration off-shore in 
Turkmenistan's area of the Caspian Sea.  Myradov also 
stressed that proposals were being considered only on their 
economic merits, and not on a political basis.  Citing 
commercial confidentiality for his refusal to provide 
details, he said his agency is reviewing proposals from many 
companies and countries.  About a possible Trans-Caspian 
Pipeline, he added many questions remain to be answered 
before construction could begin.  Most significant, Myradov 
averred -- contrary to what the delegation heard from Deputy 
Chairman for Gas and Oil Tagyev (REFTEL B) -- Turkmenistan 
will look seriously at concrete proposals from Western 
copanies seeking exploration rights in the Amu Darya Basin. 
END SUMMARY. 
 
¶3.  (SBU)  Mann noted U.S. government support of the private 
sector, and emphasized that such cooperation had already led 
to success in the energy field.  As in the meeting with 
Foreign Minister Meredov (REFTEL A), Mann said that to answer 
President Berdimuhamedov's question of "Where is my 
pipeline?", the U.S. must ask, "Where is the gas?"  He asked 
for Myradov's views, assessments, and projections of new 
fields that would supply the pipeline.  Myradov stated that 
he was eager to talk with any company about oil exploration 
in the Caspian Sea blocks -- including companies from Iran, 
if they offered the most compelling deal. 
 
"U.S. COMPANIES TOO SLOW" 
 
¶4.  (SBU) Pleased by the international competition for 
Turkmenistan's offshore reserves, Myradov acknowledged that 
U.S. companies know the Caspian Sea well and are interested 
in working in Turkmenistan.  But discussions are not taking 
place exclusively with U.S. companies.  He confirmed that the 
State Agency has held discussions with U.S. companies, but 
refused to share names or details to protect confidentiality. 
 That said, American companies are not necessarily leaders in 
this competition, he noted, because "they have been too 
careful in discussions," and "don't respect time, taking too 
long to make decisions." 
 
¶5.  (SBU) Mann reminded Myradov the United States has been 
working closely with these companies for 10 years.  He 
emphasized that to engage in the more profitable "Western 
model" of slow-but-steady investment and growth, it was 
essential for Turkmenistan's energy concerns to speak with 
major companies like Chevron, ConocoPhilips, ExxonMobil, and 
others.  If Turkmenistan were to continue on its current 
course, it would be doomed to working with small companies 
that would ensure a quick revenue stream in the short term, 
but lower profits.  For now, Turkmenistan needs to focus on 
the upstream.  Mann encouraged Turkmenistan to engage 
 
ASHGABAT 00000728  002 OF 004 
 
 
seriously with Western energy majors. 
 
¶6.  (SBU) Myradov repeated several times how his agency 
works, relative to interested parties:  all companies are 
welcome to come and make proposals.  He and his colleagues 
appreciated the materials that the delegation presented. 
After reviewing charts on the Norwegian model, he was 
especially interested in a study of the production sharing 
agreement (PSA) versus joint-venture approach.  Mann offered 
to have such an analysis prepared in Washington and also 
recommended close consultations with the European market. 
 
SEND THE EUROPEAN MARKET A SIGNAL -- NOW 
 
¶7.  (SBU) Bryza noted that Gazprom supplies 25% of Europe's 
gas needs.  Distributing maps indicating prices paid for gas 
based on origin, Bryza explained that Gazprom manages to 
continue this high level of supply to Europe by purchasing 
gas from Turkmenistan, but there is a big gap between the 
price Gazprom receives from the Europeans and the price it 
pays Turkmenistan.  The result to Turkmenistan is a 
significant loss of profits.  Bryza emphasized the United 
States wants to see Turkmenistan receive a fairer profit 
margin, and wants Turkmenistan and Europe to have the choices 
that alternate pipelines would give them.  Building a large 
project like TPC right away is unnecessary, but a small 
project such as an extension linking Petronas' gas production 
in the Livanov field to the existing Shah Deniz system would 
send a strong message to the European energy market that 
Turkmenistan is serious about becoming a trade partner. 
Emphasizing that Azerbaijan's President Aliyev had initially 
wanted to focus on oil, rather than gas, Bryza noted Aliyev 
has since opted to emphasize gas because he sees a window of 
opportunity.  With this in mind, Aliyev also sees new 
possibilities for cooperation with Turkmenistan, since 
pipelines will not have enough gas to supply Europe for the 
next 30 years without Turkmenistan's participation.  Bryza 
concluded, "All wait for Turkmenistan to take the next step." 
 
¶8.  (SBU) Myradov pointed out that President Berdimuhamedov 
said in Turkmenbashy during the 
Berdimuhamedov-Putin-Nazarbayev Trilateral Summit in May that 
Turkmenistan was not ruling out the possibility of a TCP. 
"We're ready," he said.  International experts claim the 
Caspian has huge hydrocarbon resources, and Turkmenistan 
wants to discuss seriously how to get those resources to 
Europe.  When Bryza stated that the most realistic immediate 
possibility is sending gas from the Livanov field to 
Azerbaijan, Myradov said, "I cannot tell you entirely what 
was decided, but I can say that (the president's statement) 
was a good signal."  However, he continued, Turkmenistan 
needs to see "realistic" proposals; gas flows from contracts. 
 When Mann asked who has the right to sell the gas from 
Livanov, Myradov responded firmly it is the Government of 
Turkmenistan.  Mann stressed again that now is the time to 
send a signal to European markets that there is a new source 
of gas.  He noted Petronas had expressed interest in selling 
the Livanov gas through Azerbaijan.  Sending the gas to 
Azerbaijan would allow Turkmenistan to enter the European 
market. 
 
PETRONAS IRKED AT SOCAR 
 
¶9.  (SBU) In a separate meeting, the Petronas representative 
in Turkmenistan complained he had gotten no answers from 
Azerbaijan on transit tariffs if Livanov gas is shipped 
westward.  SOCAR did not keep its word.  Petronas had booked 
the Istiqlal rig a year in advance, but when the moment 
arrived was told to wait another month, at significant cost 
to Petronas. 
 
 
ASHGABAT 00000728  003 OF 004 
 
 
AMU DARYA BASIN NOT CLOSED TO THE WEST BY LAW 
 
¶10.  (SBU) Myradov stated that Turkmenistan is seriously 
considering steps to get gas to Europe, not only through 
Livanov, but also through other routes.  (COMMENT:  He may 
have been alluding to Turkey's recent agreement in principle 
to sell gas to Europe from Iran and Turkmenistan via Iran. 
See ANKARA 1809.  END COMMENT.)  This is a historical problem 
for Turkmenistan.  Mann agreed that Turkmenistan has only one 
route for now -- Gazprom -- but urged Turkmenistan not to 
close off other options by signing a contract on the Caspian 
littoral pipeline.  In addition, Mann also stressed, while 
Gazprom has been willing to accept Turkmenistan's "gas from 
the border" model, the same model would not work for a 
pipeline constructor who was investing billions of dollars 
into the pipeline, nor would a constructor want to have to 
renegotiate gas prices every few years, as Gazprom does.  If 
Turkmenistan's offshore blocks primarily offer up oil and 
Turkmenistan wants to open up a new gas pipeline, then it 
would be necessary to open new fields in the Amu Darya basin. 
 However, we had heard from Deputy Chairman for Gas and Oil 
Tagyev (REFTEL B) that the Amu Darya region is open only to 
China.  We cannot understand why this would be so, Mann said. 
 
¶11.  (SBU) Myradov claimed the main issue is that no Western 
company has yet offered a sufficiently detailed and lucrative 
proposal.  If Turkmenistan sees an offer in its favor, it 
will seriously consider, possibly accept, the offer.  When 
Mann pushed him further, Myradov admitted Turkmenistan's 2030 
hydrocarbons plan does not envision licensing foreign 
companies onshore, but, in fact, there is nothing in 
Turkmenistan's petroleum law that forbids such arrangements. 
The area is not currently open for licensing to foreign 
companies, but there is nothing to keep foreign firms from 
making detailed serious proposals that the government would 
consider seriously.  Myradov added such a proposal would be 
handicapped, however, because his agency is not the exclusive 
government body regulating onshore contracts.  Myradov stated 
that there are "no secrets" regarding hydrocarbon reserves in 
the Caspian, but did not offer any new data.  He emphasized 
again that Turkmenistan's interests are largely commercial. 
 
POLITICAL REHABILITATION STARTING? 
 
¶12. (SBU) We were surprised to see Former Principal Deputy 
Minister of Foreign Affairs Yolbars Kepbanov participate in 
this meeting as the new head of the State Agency's legal 
department.  He said he'd been on the job only one week. 
Mann and Bryza remembered him from his previous work as lead 
on Caspian delimitation issues.  He disappeared from view 
after Niyazov accused former Foreign Minister Shikmyradov of 
playing a lead role in the attempted 2002 coup. 
 
¶13.  (SBU) COMMENT:  This is post's first indication that the 
freeze-out of U.S. companies from working the Amu Darya basin 
may not be as hard-and-fast as some Turkmenistani officials 
have so far maintained.  While Turkmenistan is still a long 
way from agreeing to allow Chevron -- or any other U.S. 
company -- to work in the Amu Darya basin, this session 
opened a door we had previously thought closed and locked. 
Likewise, Myradov's view that U.S. majors are too slow and 
cautious is further evidence that Turkmenistan does not 
understand the Western model of investment and growth.  Both 
Azerbaijan and Kazakhstan should be strongly encouraged to 
help educate Turkmenistan.  For our part, it is essential to 
identify and provide a steady stream of material to educate 
the Turkmenistani government.  Regular and high-level U.S. 
delegations play an important educational role, but 
Turkmenistan needs material it can pass broadly throughout 
the government.  END COMMENT. 
 
 
ASHGABAT 00000728  004.2 OF 004 
 
 
¶14.  (U) PDAS Mann has cleared this cable. 
HOAGLAND