VZCZCXRO2343
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #0926/01 2031251
ZNR UUUUU ZZH
P 211251Z JUL 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1201
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0401
RUEHAK/AMEMBASSY ANKARA PRIORITY 4055
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1872
RUEHKL/AMEMBASSY KUALA LUMPUR PRIORITY 0196
RUEHKO/AMEMBASSY TOKYO PRIORITY 1739
RUEHIT/AMCONSUL ISTANBUL PRIORITY 2308
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UNCLAS SECTION 01 OF 03 ASHGABAT 000926 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
PLEASE PASS TO USTDA DAN STEIN 
ENERGY FOR EKIMOFF/THOMPSON 
COMMERCE FOR HUEPER 
 
E.O. 12958: N/A 
TAGS: PREL PGOV EAID EPET AJ TX
SUBJECT: TURKMENISTAN:  OIL AND GAS MINISTER EAGER FOR 
ENGAGEMENT WITH THE UNITED STATES 
 
REF: A. ASHGABAT 343 
     ¶B. ASHGABAT 332 
     ¶C. ASHGABAT 286 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  During meetings on July 16, 
Turkmenistan's Minister of Oil and Gas, Baymurat 
Hojamuhammedov, offered U.S. Trade and Development Agency 
(USTDA) Regional Director Dan Stein and Department of Energy 
Director for Russian and Eurasian Affairs Lana Ekimoff a 
largely by-the-book overview of Turkmenistan's hydrocarbon 
sector.  He said discussions with Azerbaijan are going well, 
and that the two sides have resolved many issues.  He 
predicted that an ongoing Gaffney-Kline audit will estimate 
Turkmenistan's hydrocarbon reserves to be 7 trillion cubic 
meters.  Bucking recent indications that Turkmenistan is 
re-thinking its "we'll-do-it-ourselves" strategy for 
development of its onshore natural gas fields, Hojamuhammedov 
also adhered to the party line on allowing foreign companies 
to work onshore.  But he became substantially more expansive 
during a follow-on meeting on July 17 to discuss cooperation, 
expressing eagerness to send students to U.S. universities on 
a pay basis.  And, while he requested that the terms of 
reference for a USTDA proposal to conduct a feasibility study 
for establishing a petrochemical industry be expanded to 
include a broader chemical industry, it was clear that he is 
eager for the study and the expertise it will bring to bear. 
END SUMMARY. 
 
¶3.  (SBU) Stein and Ekimoff visited Turkmenistan July 16-17 
to explore possibilities for possible further USTDA and 
Department of Energy engagement with Turkmenistan.  In 
particular, Stein wanted to discuss a proposal for a 
feasibility study for establishing a petrochemical industry 
in Turkmenistan that the Minister Hojamuhammedov had said he 
wanted during a February visit (reftels).  During meetings on 
July 16, Hojamuhammedov offered an overview of Turkmenistan's 
hydrocarbon sector, but opted to withhold concrete discussion 
of programs until a follow-on meeting on July 17. 
 
WE HAVE RESOLVED MANY ISSUES WITH AZERBAIJAN 
 
¶4.  (SBU) With some prompting from Stein, the minister told 
Stein on July 16 that there has been a steady flow of experts 
going back and forth between Baku and Ashgabat, including the 
Chairman of Azerbaijan's SOCAR.  The two sides have resolved 
many issues, though not that of dividing the Caspian.  Now, 
they are preparing for the September 9-10 joint oil and gas 
conference in Baku.  While Turkmenistan will be sending a 
large delegation, Hojamuhammedov has asked to stay behind to 
work on plans for Hydrocarbon Workers Day on September 13 and 
on another conference, on fishing, that Turkmenistan will 
hold at the same time as the Baku conference. 
 
THE AUDIT WILL SHOW RESERVES OF 7 TRILLION CUBIC METERS 
 
¶5.  (SBU) Hojamuhammedov told Stein that Turkmenistan 
estimates that its reserves are contained in some 140-150 gas 
fields.  In general, its production has been 70-80 billion 
cubic meters (bcm) per year, depending on demand.  Recently, 
Turkmenistan has started working two new fields at South 
Yoloten and Osman, where the gas is located under a thick 
salt layer.  While Turkmenistan had problems drilling through 
the salt layer, it finally succeeded in doing so in 2005, and 
found high-pressure gas.  Further exploratory drilling has 
shown that the two fields in fact belong to the same vast 
field, which the government has estimated holds 4 trillion 
 
ASHGABAT 00000926  002 OF 003 
 
 
cubic meters of gas.  In addition, the government is finding 
some encouraging indications in its field at Garajalyk. 
Hojamuhammedov predicted that an ongoing audit by 
Gaffney-Kline will show that Turkmenistan has total natural 
gas reserves of 7 trillion cubic meters.  He expects that the 
audit will completed in September or October. 
 
¶6.  (SBU) Returning later to this issue when Stein advocated 
allowing foreign petroleum companies to work in 
Turkmenistan's onshore oil companies, Hojamuhammedov claimed 
that his country can increase production if there is 
sufficient demand.  Development of South Yoloten alone will 
increase production by 50-60 bcm per year.  Adhering closely 
to the official line that Turkmenistan will only consider 
foreign involvement in a service capacity, he claimed that 
working its own reserves will allow his country to get a 
return on its investment sooner. 
 
CASPIAN LITTORAL PIPELINE ON SCHEDULE 
 
¶7.  (SBU) Hojamuhammedov denied that the lack of references 
during Russian President Medvedev's visit to Turkmenistan 
signals that the Caspian littoral pipeline to Russia is in 
trouble.  Rather, he said, nobody discusses it because work 
is underway.  Working groups from Russia, Turkmenistan and 
Kazakhstan meet with each other, and Turkmenistan and 
Kazakhstan have both ratified the agreement.  Turkmenistan 
expects the pipeline's construction to begin in 2009. 
Hojamuhammedov also stated that Gazprom and Turkmenistan have 
yet to agree to a 2009 price for natural gas, although the 
two sides are moving closer.  Hojamuhammedov ducked Stein's 
question on Gazprom's proposed price, stating that the 
discussions are confidential, and was disappointed when Stein 
refused to pass on the price the Russians suggested to 
Azerbaijan. 
 
TURKMENISTAN WANTS TO SEND STUDENTS TO U.S. ON A PAY BASIS 
 
¶8.  (SBU) During a two-hour follow-on meeting on July 17, the 
minister told Ekimoff that his ministry is still interested 
in following up on many of the proposed activities on the 
Department of Energy's one-year engagement plan.  He was 
particularly enthusiastic about the prospect of sending 
Turkmen students to U.S. universities, and requested more 
information about the cost.  Turkmenistan, he said, is 
willing to pay tuition, as will do for 100 students that it 
will be sending to Russian schools. 
 
REQUEST TO WIDEN TERMS OF REFERENCE 
 
¶9.  (SBU) The minister then turned to the USTDA draft grant. 
Although the USTDA grant proposal has received general 
agreement from the Cabinet of Ministers, the minister 
requested that Stein change the terms of reference to reflect 
the establishment of not just a petrochemical industry, but 
also a larger chemical industry.  He justified the request by 
stating that Turkmenistan has already made a decision to 
build a petrochemical plant next to the old refinery at 
Seydi.  His country has also thoroughly analyzed what it can 
produce and use, as well as refining techniques. 
Turkmenistan has concluded that its two oil refineries are 
enough to fulfill its projected domestic and export needs. 
For that reason, the Ministry of Oil and Gas would find a 
wider study more useful.  At Stein's request, the minister 
agreed to submit language modifying the terms of reference, 
which would better help USTDA understand what Turkmenistan 
wants.  But Stein promised to consider all modifications that 
Hojamuhammedov proposed, including new wording that would 
 
ASHGABAT 00000926  003 OF 003 
 
 
ensure that the minister does not bear any responsibility for 
verifying the list of expenses submitted by the contractor 
when he submits his invoice for the final report.  (COMMENT: 
We believe that this may be out of concern that he could fall 
victim to scrutiny of the program by Turkmenistan's Supreme 
Auditing Chamber, a new GAO-type body.  END COMMENT.) 
 
¶10.  (SBU) COMMENT:  Hojamuhammedov clearly wants -- badly -- 
the expertise and advice that the USTDA study can provide. 
Having been forced to make a political decision to save the 
Seydi refinery (the older of the two refineries that he 
mentioned -- see ref a), however, he is clearly afraid that 
the study will show that decision to have been a bad one. 
Seydi is isolated in the eastern part of the country, far 
from the facility's most likely foreign markets -- or even 
most domestic markets.  However, by broadening the study's 
scope, he probably believes that he can end up with a product 
that he can use but that does not focus so heavily on Seydi. 
 
¶11.  (SBU) COMMENT CONTINUED:  Most interesting was the 
difference in dynamics between the two meetings.  At the end 
of the approximately two-hour July 17 meeting, Hojamuhammedov 
told Stein that he had intended to just show up for the first 
few minutes, and then turn the meeting over to his deputy. 
It was clear throughout the meeting on the 17th, however, 
that Hojamuhammedov enjoyed the give-and-take with Stein.  We 
suspect the biggest factor that led him to stay may have been 
the absence of a Ministry of Foreign Affairs minder (who was 
present at the July 16 meeting).  The MFA's presence may also 
have explained just why the July 16 meeting was so 
by-the-book.  END COMMENT. 
CURRAN