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- SIPDIS
- SENSITIVE
- SIPDIS
- ENERGY FOR CDAY AND ALOCKWOOD
- NSC FOR JCARDENAS AND JSHRIER
- E.O. 12958: DECL: 01/12/2017
- TAGS: EPET, ENRG, EINV, ECON, VE
- SUBJECT: STATOIL: A GOOD DEAL
- REF: A. CARACAS 1281
- B. CARACAS 1655
- C. CARACAS 472
- D. CARACAS 1314
- E. CARACAS 1675
- F. CARACAS 1157
- G. CARACAS 1808
- Classified By: Economic Counselor Andrew N. Bowen for Reason 1.4 (D)
- 1. (C) SUMMARY: Contrary to repeated BRV statements,
- Norway\'s Statoil will receive cash compensation for its lost
- equity in the Sincor strategic association. Under the terms
- of the migration agreement, major investment decisions will
- be made by qualified majority. PDVSA has been instructed not
- to fire employees on political grounds. This suggests that
- PDVSA offered widely varying terms to at least some of the
- six companies that invested in the Faja strategic
- associations. END SUMMARY
- ------------------
- A PRETTY GOOD DEAL
- ------------------
- 2. (C) Petroleum Attache (Petatt) met with Statoil Venezuela
- President Thore Kristiansen (strictly protect throughout) on
- September 12 to discuss the terms of the Sincor migration to
- a PDVSA-controlled joint venture (Reftel A). Kristiansen
- began the meeting by noting that Statoil received a good deal
- under the circumstances. Contrary to Energy Minister Rafael
- Ramirez\' public statement on August 29 that neither Statoil
- or Total received compensation for their lost equity in the
- Sincor strategic association. Kristiansen stated that PDVSA
- has agreed to compensate Statoil. (Note: Under the terms of
- the migration, Statoil\'s stake in Sincor was reduced from 15
- to 10%. End Note.)
- 3. (C) According to Kristiansen, Statoil will receive its
- compensation in the form of cash but has the option of
- receiving it in crude oil. He stated he was more than 90%
- sure that Statoil would take the cash. Although he would not
- state the amount of the compensation, he implied that it was
- well above book value, which was PDVSA\'s opening offer. He
- stated Statoil would have refused to migrate its interest if
- it had only received book value.
- 4. (C) As reported in Reftel A, Energy Minister Ramirez also
- stated that each of the strategic associations\' blocks would
- be reduced during the migration process. When Petatt raised
- the issue, Kristiansen stated Sincor\'s block had actually
- been increased from roughly 312 square kilometers to 399
- square kilometers. He explained that Sincor\'s original block
- assignment had contained several areas that were reserved to
- Sincor but that could not be added to its block without BRV
- approval. As part of the migration process, the reserved
- areas will be added to Petrocedino, the PDVSA controlled
- joint venture that will be formed from Sincor.
- ----------
- GOVERNANCE
- ----------
- 5. (C) Kristiansen also stated that Statoil was pleased with
- the governance terms of Petrocedino. Various types of
- decisions require board approval by qualified majorities of
- 51, 71, or 91%. The joint venture\'s business plan and all
- major investment decisions require a qualified majority.
- Kristiansen stated the governance terms looked good on paper
- but added it remained to be seen if the BRV and PDVSA would
- honor them in practice. He later stated, however, that
- having the terms in \"black and white\" would allow Statoil to
- \"hold it up to PDVSA\'s face\" if PDVSA breached the terms.
- CARACAS 00001822 002 OF 002
- ------------
- LABOR ISSUES
- ------------
- 6. (C) Kristiansen noted that the opposition paper Tal Cual
- had run several stories reporting that Sincor employees had
- been fired on political grounds (Reftel B). Following the
- publication of the stories, Kristiansen stated Minister
- Ramirez sent a three page memo to senior PDVSA officials
- stating that it was a violation of Venezuelan law to
- discriminate against employees or fire them for their
- political beliefs. He added that it was clear from
- conversations with PDVSA managers in Sincor that they had
- clearly received the message. Kristiansen noted that it
- remained to be seen if PDVSA would stick to its new labor
- policy once the migration was completed.
- 7. (C) Kristiansen stated Sincor employees have still not
- received their new Petrocedino employment package. He added
- that there was no timeline for the delivery of the package to
- the employees.
- -------
- COMMENT
- -------
- 8. (C) Kristiansen told Petatt in March that the three most
- important issues for Statoil during the migration
- negotiations were compensation, governance, and taxes (Reftel
- C). Although he did not mention taxes in the meeting, it was
- clear that Statoil was pleased with the terms of the
- migration. Statoil\'s comments regarding governance issues
- closely mirror Chevron\'s (Reftel D).
- 9. (C) It is apparent based on our conversations with five
- of the six companies that invested in the Faja strategic
- associations that the BRV offered widely differing terms to
- the companies. For example, the BRV reduced Cerro Negro\'s
- block size and BP paid half a million dollars in notes in
- order to minimize the block\'s reduction (Reftel E). Both
- ExxonMobil and ConocoPhillips stated the BRV has consistently
- stated it would only compensate them based on the book value
- of their investments and refused to show flexibility on
- governance terms (Reftels F and G).
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