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C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000188 
 
SIPDIS 
 
STATE FOR SCA/CEN; EEB; 
ENERGY FOR EKIMOFF/BURPOE/COHEN 
COMMERCE FOR DSTARKS/EHOUSE 
 
E.O. 12958: DECL: 02/10/2020 
TAGS: EPET ECON PGOV EINV BTIO MY TX
SUBJECT: MALAYSIA'S PETRONAS CONTINUES TO INVEST IN 
TURKMENISTAN 
 
REF: 09 ASHGABAT 661 
 
Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d). 
 
¶1. (C) On February 9, econoff met with Malaysian energy 
company Petronas' General Director for Turkmenistan Yeow Kian 
Chai.  He characterized his company's work in Turkmenistan as 
"really tough," but emphasized that Petronas was one of two 
foreign energy companies that are currently producing oil 
and/or gas under offshore production sharing agreements (PSA) 
with the Government of Turkmenistan (GOTX).  (NOTE:  The 
UAE-based Dragon Oil currently produces oil in the Cheleken 
contractual territory.  END NOTE.)  He stated that Petronas 
has been working on developing offshore oil and gas resources 
in Block 1 of Turkmenistan's territory in the Caspian Sea 
since 1997 (reftel).  He described the geology in Block 1 as 
"tricky," adding that it has taken 13 years to yield a mere 
6,000 barrels of oil a day, which is not a profit-turning 
volume.  In addition to oil production, the company plans to 
transport associated gas from Block 1 fields to its gas 
processing plant in Kiyanli (40-50 km away from the gas 
source) via small pipelines.  He estimated that the company 
has already spent close to $3 billion in Turkmenistan, 
acknowledging that it has yet to primary gas deposits. 
 
¶2. (C) The Petronas general director explained that more oil 
will be produced, once associated gas is lifted from the 
wells.  He predicted that Petronas would have primary gas 
production by the end of Q1 in 2010, and estimated that it 
would be able to produce 5 billion cubic meters (bcm) of gas 
by the end of 2010 or the first part of 2011.  Once drilling 
reaches primary gas deposits, the company hopes to increase 
oil production to 12,000 barrels per day.  He stressed that 
Turkmenistan's landlocked geography and the absence of a 
trans-Caspian pipeline meant that Petronas' predicted 5 bcm 
of gas for 2010 would most likely be sent North to Russia via 
existing pipelines.  In addition, he did not know if Russia's 
intention to purchase only 10.5 bcm of gas from Turkmenistan 
in 2010 would result in Petronas's inability to offload its 
gas to Russia, especially if the GOTX planned to fill the 
10.5 bcm order with its own gas.  He was confident that some 
kind of arrangement would be made to ensure that Petronas 
could unload its gas "somewhere," but he was unable to 
provide more details. 
 
¶3. (C) When asked if Petronas had plans to seek out 
additional projects in the country, the company general 
director responded that it remains vigilant in searching for 
opportunities.  He ruled out any onshore gas projects, 
however, stressing that the GOTX gave Petronas "an emphatic 
no" on proposals involving onshore production.  He 
underscored that the GOTX currently views all onshore gas 
production as something the GOTX can do on its own, or with 
service companies only.  At the same time, he felt that 
Petronas' longstanding commercial relationship with the GOTX 
could provide the company with another offshore block, if 
Petronas chose to pursue one.  He thought that partnering 
with another international oil company to pursue an 
additional Caspian block was a definite possibility, adding 
that talks with potential European and U.S. partners were 
ongoing. 
 
¶4. (C) According to the general director, Petronas  employees 
approximately 600 workers, with less than 100 expats. He 
cited the GOTX's requirement that a foreign company's 
workforce must comprise 70 percent Turkmen citizens, adding 
that Petronas plans to downsize its expat cadre even more, 
since the incentive package needed to entice expats to 
Turkmenistan is too costly.   Moreover, one of Petronas' 
biggest investments in the country is training Turkmen 
 
ASHGABAT 00000188  002 OF 002 
 
 
employees as highly skilled technicians, engineers, and field 
managers.  He lamented that the Turkmen workforce was highly 
undereducated and undertrained, but stressed that Petronas 
has successfully sent Turkmen employees to Malaysia for 
training or provided on-site training in Turkmenbashy and 
Kiyalin.  He also noted the company's scholarship program, 
which allows recipients to complete 2-year masters degrees in 
or outside Turkmenistan in appropriate technical disciplines. 
 (NOTE: In 2008, President Berdimuhamedov reinstated a 
graduate-level degree in Oil and Gas Development at the 
Turkmen Polytechnic Institute, which was previously closed by 
former President Niyazov.  The program accepts few students, 
is reportedly significantly weaker than similar programs in 
Russia, and currently only graduates 2-3 students per year. 
END NOTE) 
 
¶5. (C) COMMENT: Petronas is a large energy company with 
operations in 30 countries.  The company has been present in 
Turkmenistan for 14 years, but has had little reason to 
celebrate its results to date.  When comparing operations in 
Turkmenistan with the company's operations in other 
countries, the country general director stated that 
Turkmenistan "is one of the toughest places to do business in 
the world."  At the same time, Petronas has no plans to leave 
Turkmenistan anytime soon, citing the country's potential and 
untapped hydrocarbon resources.  Like many foreign energy 
companies in the country, Petronas is working hard to train 
and educate its Turkmen workforce, especially since the 
company understands that a long-term commitment to 
Turkmenistan is generally a prerequisite for future business. 
 END COMMENT. 
CURRAN