VZCZCXRO2229
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1316/01 3371524
ZNR UUUUU ZZH
P 031524Z DEC 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9830
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3078
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0893
RUEHKO/AMEMBASSY TOKYO PRIORITY 0767
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1343
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 ASHGABAT 001316 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN AND EEB; PLEASE PASS TO USTDA DAN SULLIVAN 
ENERGY FOR EKIMOFF/THOMPSON 
COMMERCE FOR HUEPER 
 
E.O. 12958: N/A 
TAGS: PREL EPET PGOV TX IEA
SUBJECT: TURKMENISTAN/INTERNATIONAL ENERGY AGENCY: 
RENEWING A LONG-DORMANT RELATIONSHIP 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU)  SUMMARY:  During a November 28-30 visit to 
Turkmenistan, the Deputy Executive Director of the 
International Energy Agency (IEA) Ambassador William Ramsay, 
found a country in the process of transition.  Although there 
were signs that leaders are becoming more accessible, 
old-thinking -- including in the oil and gas sector -- and a 
lack of confidence in dealing with large hydrocarbons 
companies continue to constrain Turkmenistan's ability to 
realize its potential.  Ramsay said he raised a number of 
tough issues, including both lack of statistical transparency 
about existing reserves and the problems with finding 
alternative gas export routes, during his meetings with 
President Berdimuhamedov and the Executive Director of 
Turkmenistan's State Agency for Hydrocarbon Resources, but 
there is no indication as yet that those messages hit home. 
END SUMMARY. 
 
¶3.  (U) The International Energy Agency (IEA) Deputy 
Executive Director, Ambassador William Ramsay, and Adviser on 
Caspian Affairs, Christof van Agt, told the Charge November 
30 that their November 28-30 visit -- the first by an IEA 
team since before former President Niyazov's death in 
December 2006 -- was presenting "interesting contrasts" with 
their previous visit.  Now, Turkmenistan's officials are 
talking more and seem more open and accessible, but there 
remains a nostalgia for the old ways among Turkmenistan's 
bureaucracy.  IEA had come to Turkmenistan to see how the 
hydrocarbon situation is evolving in the Caspian, 
particularly with regard to development of more diversified 
sources of gas, constraints on exports to (and through) 
Russia and Iran, and whether diversification can offer more 
competitive prices. 
 
TURKMENISTAN'S OLD HABITS BAD FOR BUSINESS 
 
¶3.  (SBU) Noting that it is a good thing that U.S. and 
European officials are more interested in Turkmenistan, 
Ramsay said that, even as he finds much that is new in 
Turkmenistan, rigidities still remain.  Turkmenistan has done 
some interesting studies that show some promising formations. 
 At the same time, the government remains unwilling to show 
what is under the tent.  If the country genuinely wants to 
promote investment by foreign hydrocarbon companies, as its 
president says publicly, it needs to show the statistics. 
And, while hydrocarbon officials seemed locked into current 
contract arrangements (production sharing agreements with 
foreign companies, and not allowing foreign company 
involvement in onshore drilling, with the exception of the 
Burren Energy and China National Petroleum Company (CNPC) 
PSAs), they clearly do not understand the full implications 
of those arrangements.  Although Burren is "okay," Ramsay 
continued, Turkmenistan is likely to be hurt in its 
arrangements with CNPC, because China does not play by the 
rules.  The only reason to go forward with Turkmenistan's 
deal with China (for a pipeline, scheduled to open in 2009, 
and a PSA region located on the right bank of the Amu Darya 
river) is to make the point to Russia that Turkmenistan has 
other options. 
 
¶4.  (SBU) Ramsay also commented that Turkmenistan's cash flow 
situation also seems to have changed substantially from five 
years ago.  Five years ago, Turkmenistan was getting "beads 
and wampum" for its gas, while it is now looking forward to 
getting $150 per thousand cubic meters (tcm) of gas from 
Gazprom by the second half of 2008.  However, Ramsay added, 
it is not clear that Turkmenistan is using that cash much 
better than before.  Later, Ramsay expressed concern that the 
Central Asia-Center (CAC) pipeline, Turkmenistan's main gas 
export route to Russia, has not been well maintained for a 
 
ASHGABAT 00001316  002 OF 003 
 
 
long time.  Russia has no fallback if the CAC supply were cut 
off because of a major rupture, and such an event would also 
affect Russia's supply of gas to Europe. 
 
TURKMEN OFFICIALS LACK CONFIDENCE IN DEALING WITH THE "BIG 
GUYS" 
 
¶5.  (SBU) Ramsay noted that a number of large international 
oil companies had expressed interest in doing business in 
Turkmenistan.  While the Government of Turkmenistan had 
welcomed these companies' interest, however, Ramsay had the 
sense that government officials felt intimidated by these 
companies -- they would prefer to work with smaller firms, 
such as Parker Drilling -- and would likely take their time 
in making any decisions related to contracts with these 
larger firms.  In the meantime, he predicted, Turkmenistan 
would look to national companies of countries where it has 
some influence, in hopes of not getting in over its head. 
And, while the "big guys" want to be onshore, Ramsay said, he 
has the sense that they will be waiting for a while for the 
government's agreement -- unless they can come up with a very 
new way to structure their agreements, as the French company 
Total had done elsewhere.  That said, Turkmenistan has very 
difficult-to-access deposits onshore that Turkmengas does not 
have the technology to work.  This means that the government 
eventually will have to call on others to help it. 
 
RAMSAY RAISES IRAN AND RUSSIA WITH PRESIDENT... 
 
¶6.  (SBU) IEA's meeting with President Berdimuhamedov was 50 
minutes and "very cordial," according to Ramsay.  The 
president talked about the hydrocarbons markets in China and 
Europe, and strategies -- such as a Trans-Caspian pipeline 
(TCP) and Chinese pipeline -- for getting Turkmenistan's gas 
to those markets.  IEA also raised Iran's limited ability to 
import much gas on anything other than a seasonal basis, and 
Russia's stranglehold on Turkmenistan's gas.  Ramsay said 
that he described the Chinese pipeline as a "Declaration of 
Independence" from Russia.  Berdimuhamedov invited Ramsay to 
return to Turkmenistan. 
 
AND TRANSPARENCY WITH MURADOV 
 
¶7.  (SBU) By contrast, Ramsay found the Executive Director of 
the State Agency for Management and Use of Hydrocarbon 
Resources, Bayrammyrat Muradov, "crusty" and "Soviet in 
style."  According to Ramsay, Muradov asked why he should be 
talking to the IEA if the organization had nothing concrete 
to offer.  Muradov's manner lightened up substantially after 
Ramsay dropped a huge stack of IEA-generated information and 
statistics on the table for Muradov to use after the group's 
departure.  With Muradov, Ramsay made the point that, if 
Turkmenistan continues to sell its gas at the border, the 
government needs to be more transparent about its reserves if 
it really wants the outside world to invest in new pipelines, 
such as a TCP.  No company will want to commit the necessary 
financial resources for a new pipeline unless it can be 
certain that there are enough reserves to keep the pipeline 
operating. 
 
PIEBALGS A "STRAIGHT SHOOTER" 
 
¶8.  (SBU) Noting EU Commissioner for Energy Andris Piebalgs' 
visit to Turkmenistan during the November 13-15 Turkmenistan 
International Oil and Gas Exhibition (TIOGE), Ramsay said 
that Europe has awakened to the need for an energy policy. 
Inside the EU, however, there is no unity or harmony on this 
issue.  Ramsay also added that Piebalgs' visit was a good 
sign because he is perhaps the most lucid of the EU energy 
community.  Although he shoots straight, he is not a 
hardliner, possibly because of his Latvian background. 
 
ASHGABAT 00001316  003 OF 003 
 
 
 
INVESTMENT CLIMATE NEEDS IMPROVING 
 
¶9.  (SBU) Ramsay said he also made the point to both 
Berdimuhamedov and Muradov that Turkmenistan needs to change 
the investment climate for oil and gas companies to want to 
come to Turkmenistan, but it also needs to change the climate 
for investment in its electricity production.  Many companies 
want to work in the electricity production sector, but 
Turkmenistan needs to produce a guaranteeable electricity 
rate base for companies to be willing to make the investment. 
 
¶10.  (SBU) COMMENT:  The president clearly was prepared to 
listen to Ramsay, a representative of an international 
organization that is viewed as an expert but impartial -- or, 
at least, less partisan -- observer of international 
hydrocarbon developments.  While not all Ramsay's carefully 
thought-out messages may have struck pay dirt this time 
around, post sees merit in such visits, since they allow 
others to reinforce messages that the United States itself 
has been seeking to send, while gradually allowing 
Turkmenistan to find a new role in the international 
community. 
CURRAN