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DE RUEHAH #0332/01 0720615
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P 120615Z MAR 08
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UNCLAS SECTION 01 OF 02 ASHGABAT 000332 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
PLEASE PASS TO USTDA DAN STEIN 
COMMERCE FOR HUEPER 
ENERGY FOR EKIMOFF 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EPET EINV TX
SUBJECT:  TURKMENISTAN:  POTENTIAL OF THE PETROCHEMICALS INDUSTRY 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Turkmenistan has decided to enter the 
petrochemical sector by building a new refinery and oil and gas 
cracker at a Soviet-era, white-elephant refinery in eastern 
Turkmenistan that never did reach its full production.  A 
definitional mission carried out by a U.S. Trade and Development 
Agency (USTDA) consultant determined that Turkmenistani personnel 
lack the training and knowledge needed to ensure a successful start, 
even though the country has the cheap feedstock that makes it a good 
candidate for establishing a petrochemical industry.  And, while 
locating a new petrochemical industry at the refinery might make 
political sense for the dying, one-industry town, the location lacks 
some important qualities, such as proximity to hydrocarbon fields 
and pipelines to transport oil and gas to the facility, that might 
make the difference between success and failure.  END SUMMARY. 
 
¶3.  (SBU) USTDA carried out a definitional mission to Turkmenistan 
March 4-11 to assess potential areas of further technical assistance 
in the petroleum sector.  As part of the definitional visit, a USTDA 
contractor met with a number of petroleum officials and made site 
visits to assess the potential for establishing a successful 
petrochemical sector in Turkmenistan.  This visit was a result of 
earlier discussions between the U.S. government and the Government 
of Turkmenistan. 
 
SEYDI TODAY -- TIRED, OUT OF DATE, AND LACKING RESOURCES 
 
¶4.  (SBU) Turkmenistan's Seydi refinery, located not far from 
Turkmenabat City in northeastern Turkmenistan, was designed in the 
1970's to process sweet crude oil from Tyumen in Siberia via the 
Pavlodar (Russia)-to-Chimkent (via Uzbekistan) pipeline.  The 
pipeline still exists, but no oil has flowed from outside of 
Turkmenistan to Seydi for years.  The refinery's construction 
stopped in 1991 with installation of only two processing units of 
the original design: a crude oil refining unit (atmospheric 
distillation and desalter) with a capacity to process 6 million tons 
a year, and a catalytic reformer for 1 million tons of oil a year. 
The reformer has not been operational since 1994 -- most likely 
because of its obsolete technology. 
 
¶5.  (SBU) The refinery currently processes a mixture of gas 
condensate from Mary and Lebap regions and crude oil from Yashildepe 
field, located 200 kilometers southeast of Seydi.  The refinery 
currently processes around 1 million tons of oil a year to produce 
straight-run gasoline, diesel fuel, and heavy fuel oil. 
Insufficient supplies of raw materials forces the refinery to shut 
down several times a year to accumulate a critical mass of 
feedstock.  The refinery was visibly not in operation during the 
March 8 USTDA visit. 
 
TURNING A WHITE ELEPHANT INTO A HIGH-YIELD NEW SECTOR 
 
¶6.  (SBU) Seydi's chief engineer, Dovlet Berdiyev, told the USTDA 
consultant that a small team of engineers at the Seydi refinery had 
made a desk study of various petrochemical production configurations 
and had proposed to Turkmenistan's Cabinet of Ministers construction 
of a new refinery and a petrochemical facility next to the original 
production site.  The proposed capacity for the new oil refining 
plant is 3 million tons of oil a year.  Turkmenistani experts 
estimated that such production would saturate the demand for 
gasoline and diesel in central and eastern Turkmenistan.  The excess 
crude, particularly in the west of the country, Turkmenistan plans 
to export overseas. 
 
¶7.  (SBU) However, assuring sufficient availability of raw materials 
for a Seydi petrochemical industry remains a question.  Berdiyev 
noted Kazakhstani officials had earlier proposed to transport oil 
from the Kumkol field in Kazakhstan via the Pavlodar-Chimkent 
pipeline and process it at Seydi.  However, he gave no additional 
 
ASHGABAT 00000332  002 OF 002 
 
 
information whether the Government of Turkmenistan was giving due 
consideration to this proposal, or to the possibility of an 
alternative supply from Uzbekistan.  Transportation may also be a 
problem, since there are no pipelines from Turkmenistan's 
hydrocarbon fields to the Seydi complex. 
 
¶8.  (SBU) The Seydi staff also proposed to produce 200,000 tons of 
polyethylene from a new steam cracker and 90,000 tons of 
polypropylene from a new catalytic cracker and/or steam cracker, 
depending on the feedstock.  When asked about the criteria for 
choosing these particular production capacities, Berdiyev responded 
that the proposal had used the Turkmenbashy refinery polypropylene 
installation as the benchmark for the new facility.  The capacity of 
the steam cracker was based on the annual production of 3 billion 
cubic meters of gas and the methane content in the natural gas at 
Bagaja and Malay gas fields located near Seydi.  Under their plan, 
the ethane that would be used for producing polypropylene will be 
extracted at the newly proposed refinery, although a new pipeline 
would need to be built from the fields.  The remaining methane would 
be fed into the pipeline system.  The propane and butane fractions 
would be extracted at the wellhead. 
 
¶9.  (SBU) Turkmenistan also wants to assess the potential for 
production of toiletries and detergents for the domestic market, but 
recognizes that a detailed marketing study is required to determine 
whether to produce feedstock or ready products.  (NOTE: 
Yashildepe's crude has a good aromatics content.  END NOTE.) 
However, the proposal with which the government is currently working 
is somewhat limited in its marketing content, since it only used 
prices in Russia for analysis. 
 
¶10.  (SBU) COMMENT:  While Turkmenistan has the cheap feedstock it 
needs to develop a successful petrochemical sector, Seydi, with its 
distance from Turkmenistan's main hydrocarbon fields and its limited 
transportation opportunities, may not be the best location for 
establishing such a sector.  It is also not clear that the scale of 
production that the authorities are planning will make the project 
competitive in a market that favors economies of scale.  The 
government may have made a political decision to locate its new 
petrochemical facility at Seydi to help resuscitate the dying, 
one-industry town.  Given the high cost (our USTDA consultant 
estimated $4-5 billion) of building a steam cracking facility, and 
Seydi's limitations, it is critically important that Turkmenistan 
understand from the beginning the cost of proceeding with this plan. 
 To do so, however, officials will need assistance, since even they 
acknowledge that they do not have the capacity to properly analyze 
the alternatives and make a well-informed decision.  END COMMENT. 
 
HOAGLAND