VZCZCXRO8354
PP RUEHAG RUEHBI RUEHCI RUEHLH RUEHPW RUEHROV
DE RUEHAH #0044/01 0100533
ZNY CCCCC ZZH
P 100533Z JAN 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 0038
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3223
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1038
RUEHKL/AMEMBASSY KUALA LUMPUR PRIORITY 0030
RUEHKO/AMEMBASSY TOKYO PRIORITY 0909
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1486
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
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RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000044 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/RA, EUR/CARC, EEB (AMB. MANN) 
PLEASE PASS TO USTDA DAN STEIN 
ENERGY FOR EKIMOFF/THOMPSON 
COMMERCE FOR HUEPER 
USAID/W FOR EE/AA 
 
E.O. 12958: DECL: 01/09/2018 
TAGS: PREL PGOV EPET AZ TX
SUBJECT:  TURKMENISTAN:  PETRONAS SEEKS OPTIONS TO EXPORT 
GAS 
 
REF: A. ASHGABAT 0034 
     ¶B. 07 ASHGABAT 1076 
 
Classified By: Charge Richard E. Hoagland for reasons 1.4(B) and (D). 
 
¶1.  (C) SUMMARY:  While the Malaysia-based hydrocarbon 
company Petronas continues to move forward with plans to 
begin producing natural gas in Turkmenistan's Livonov block, 
it still has not reached any final conclusions about how to 
transport that gas to market, according to the company's 
country manager.  Petronas believes that liquified petroleum 
gas (LPG) makes economic sense, but also remains interested 
in transporting its gas to Russia, either by a pipeline that 
it would be willing to build or by a Caspian littoral 
pipeline, if the three countries party to the littoral 
pipeline agreement can narrow differences on routing, 
specifications, and cost structure that he claims still 
exist.  Post believes that Petronas is not being kept in the 
loop on the status of the littoral pipeline agreement, a fact 
which may explain the frustration the country manager 
demonstrated throughout the meeting.  As he made clear, 
Petronas has to be driven by business imperatives, not 
political, and it must make its Caspian Sea operations 
profitable within the 20-year operating window of its 
production sharing agreement.  A Caspian inter-connector of 
existing Turkmenistan and Azerbaijani infrastructure would 
provide Petronas an option to export its gas directly 
westward.  END SUMMARY. 
 
¶2.  (C) During a January 8 meeting, Suleiman Abdullah, the 
Country Manager for Petronas, stated that Petronas currently 
is engaging in price negotiations with the government for the 
gas which it plans to begin producing very soon, possibly as 
early as 2009.  It is considering transporting its natural 
gas by pipeline, as liquified petroleum gas (LPG), or a 
combination of the two.  Petronas believes that LPG makes 
economic sense, and has already opened discussions with Iran 
about possible sales.  However, Suleiman stressed, Petronas 
also remains interested in building a pipeline north to 
Russia. 
 
¶3.  (C) During the meeting, Suleiman expressed doubt that 
Turkmenistan, Kazakhstan and Russia have reached agreement on 
the routing, specifications and cost structure of the new 
Caspian littoral pipeline.  (He suggested that the Russians 
may be pressing to run the new littoral pipeline directly 
from Beyneu to Alexandrov Gai, without the extra twist that 
ensures the pipeline stays on land, a change that does not 
immediately make economic or engineering sense.)  Suleiman 
also said that completion of any littoral pipeline is still 
some years off, leading Petronas to do some contingency 
planning. 
 
¶4.  (C) Specifically, Suleiman claimed, Petronas is planning 
to recondition the existing Central Asia-Center III pipeline 
to begin transporting a maximum of 5 billion cubic meters 
(bcm) of gas very soon.  By 2011, Petronas would seek to lay 
a second parallel pipeline that could carry an additional 5 
bcm.  Suleiman said Petronas was in touch up to a year ago 
with KazTransGaz to discuss link-ups and transport beyond the 
Turkmenistan border.  However, Petronas cut off these 
communications at the request of the Government of 
Turkmenistan.  (COMMENT:  The Petronas idea of a parallel 
littoral pipeline is essentially the Prikaspiskyy agreement 
Putin, Nazarbayev, and Berdimuhamedov signed in May 2007. 
That might be the reason Turkmenistan asked Petronas to stand 
down.  END COMMENT.) 
 
¶5.  (C) COMMENT:  After years of avoiding Embassy personnel, 
 
ASHGABAT 00000044  002 OF 002 
 
 
Petronas over the last six months has become increasingly 
receptive to contacts with us.  The January 8 meeting was the 
first any Embassy officer has had in Petronas' offices.  Post 
believes this is due to a combination of less pressure from 
the Government of Turkmenistan and a wish to keep options 
open, even though he previously voiced doubts about the 
feasibility of a Trans-Caspian pipleine (ref B).  Petronas is 
operating in a complex political environment where it must 
balance the interests of the different stakeholders. 
Suleiman was visibly much more frustrated during this meeting 
than in previous encounters, and seems to be feeling pressure 
to make Petronas' operations profitable within the 20-year 
operating window of its production sharing agreement.  He 
made clear -- as he has in other recent meetings -- that 
Petronas is driven by business imperatives, not political, 
and will choose the deal that makes the best business sense. 
 
¶6.  (C) COMMENT CONTINUED:  Progress on 
Turkmenistan-Azerbaijan Caspian delimitation (ref A) and a 
feasibility study for interlinking existing infrastructure 
would provide the option for Petronas to flow its gas 
directly westward through the South Caucasus to Turkey.  END 
COMMENT. 
HOAGLAND