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Statoil Cash Payout

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  1. SIPDIS
  2.  
  3. SENSITIVE
  4. SIPDIS
  5.  
  6. ENERGY FOR CDAY AND ALOCKWOOD
  7. NSC FOR JCARDENAS AND JSHRIER
  8.  
  9. E.O. 12958: DECL: 01/12/2017
  10. TAGS: EPET, ENRG, EINV, ECON, VE
  11. SUBJECT: STATOIL: A GOOD DEAL
  12.  
  13. REF: A. CARACAS 1281
  14.  
  15.      B. CARACAS 1655
  16.      C. CARACAS 472
  17.      D. CARACAS 1314
  18.      E. CARACAS 1675
  19.      F. CARACAS 1157
  20.      G. CARACAS 1808
  21.  
  22. Classified By:  Economic Counselor Andrew N. Bowen for Reason 1.4 (D)
  23.  
  24. 1. (C) SUMMARY:  Contrary to repeated BRV statements,
  25. Norway\'s Statoil will receive cash compensation for its lost
  26. equity in the Sincor strategic association.  Under the terms
  27. of the migration agreement, major investment decisions will
  28. be made by qualified majority.  PDVSA has been instructed not
  29. to fire employees on political grounds.  This suggests that
  30. PDVSA offered widely varying terms to at least some of the
  31. six companies that invested in the Faja strategic
  32. associations.  END SUMMARY
  33.  
  34. ------------------
  35. A PRETTY GOOD DEAL
  36. ------------------
  37. 2.  (C) Petroleum Attache (Petatt) met with Statoil Venezuela
  38. President Thore Kristiansen (strictly protect throughout) on
  39. September 12 to discuss the terms of the Sincor migration to
  40. a PDVSA-controlled joint venture (Reftel A).  Kristiansen
  41. began the meeting by noting that Statoil received a good deal
  42. under the circumstances.  Contrary to Energy Minister Rafael
  43. Ramirez\' public statement on August 29 that neither Statoil
  44. or Total received compensation for their lost equity in the
  45. Sincor strategic association.  Kristiansen stated that PDVSA
  46. has agreed to compensate Statoil.  (Note: Under the terms of
  47. the migration, Statoil\'s stake in Sincor was reduced from 15
  48. to 10%.  End Note.)
  49.  
  50. 3.  (C) According to Kristiansen, Statoil will receive its
  51. compensation in the form of cash but has the option of
  52. receiving it in crude oil.  He stated he was more than 90%
  53. sure that Statoil would take the cash.  Although he would not
  54. state the amount of the compensation, he implied that it was
  55. well above book value, which was PDVSA\'s opening offer.  He
  56. stated Statoil would have refused to migrate its interest if
  57. it had only received book value.
  58.  
  59. 4.  (C) As reported in Reftel A, Energy Minister Ramirez also
  60. stated that each of the strategic associations\' blocks would
  61. be reduced during the migration process.  When Petatt raised
  62. the issue, Kristiansen stated Sincor\'s block had actually
  63. been increased from roughly 312 square kilometers to 399
  64. square kilometers.  He explained that Sincor\'s original block
  65. assignment had contained several areas that were reserved to
  66. Sincor but that could not be added to its block without BRV
  67. approval.  As part of the migration process, the reserved
  68. areas will be added to Petrocedino, the PDVSA controlled
  69. joint venture that will be formed from Sincor.
  70.  
  71. ----------
  72. GOVERNANCE
  73. ----------
  74. 5.  (C) Kristiansen also stated that Statoil was pleased with
  75. the governance terms of Petrocedino.  Various types of
  76. decisions require board approval by qualified majorities of
  77. 51, 71, or 91%.  The joint venture\'s business plan and all
  78. major investment decisions require a qualified majority.
  79. Kristiansen stated the governance terms looked good on paper
  80. but added it remained to be seen if the BRV and PDVSA would
  81. honor them in practice.  He later stated, however, that
  82. having the terms in \"black and white\" would allow Statoil to
  83. \"hold it up to PDVSA\'s face\" if PDVSA breached the terms.
  84.  
  85. CARACAS 00001822  002 OF 002
  86.  
  87.  
  88.  
  89. ------------
  90. LABOR ISSUES
  91. ------------
  92. 6.  (C) Kristiansen noted that the opposition paper Tal Cual
  93. had run several stories reporting that Sincor employees had
  94. been fired on political grounds (Reftel B).  Following the
  95. publication of the stories, Kristiansen stated Minister
  96. Ramirez sent a three page memo to senior PDVSA officials
  97. stating that it was a violation of Venezuelan law to
  98. discriminate against employees or fire them for their
  99. political beliefs.  He added that it was clear from
  100. conversations with PDVSA managers in Sincor that they had
  101. clearly received the message.  Kristiansen noted that it
  102. remained to be seen if PDVSA would stick to its new labor
  103. policy once the migration was completed.
  104.  
  105. 7.  (C) Kristiansen stated Sincor employees have still not
  106. received their new Petrocedino employment package.  He added
  107. that there was no timeline for the delivery of the package to
  108. the employees.
  109.  
  110. -------
  111. COMMENT
  112. -------
  113. 8.  (C) Kristiansen told Petatt in March that the three most
  114. important issues for Statoil during the migration
  115. negotiations were compensation, governance, and taxes (Reftel
  116. C).  Although he did not mention taxes in the meeting, it was
  117. clear that Statoil was pleased with the terms of the
  118. migration.  Statoil\'s comments regarding governance issues
  119. closely mirror Chevron\'s (Reftel D).
  120.  
  121. 9.  (C) It is apparent based on our conversations with five
  122. of the six companies that invested in the Faja strategic
  123. associations that the BRV offered widely differing terms to
  124. the companies.  For example, the BRV reduced Cerro Negro\'s
  125. block size and BP paid half a million dollars in notes in
  126. order to minimize the block\'s reduction (Reftel E).  Both
  127. ExxonMobil and ConocoPhillips stated the BRV has consistently
  128. stated it would only compensate them based on the book value
  129. of their investments and refused to show flexibility on
  130. governance terms (Reftels F and G).
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