Les også: Statoils mislykkede strategi i Venezuela

2008-02-28 18:12






REF: A. 2007 CARACAS 1822 B. CARACAS 108

Classified By: [Text removed by Aftenposten] for Reason 1.4 (D)

1. (C) SUMMARY: Norways StatoilHydro received a far more lucrative compensation package for its lost equity in the former Sincor strategic association than reported in the press. The BRV and PDVSA have taken a number of steps to increase oil companies confidence in Venezuelas investment climate. However, President Chavez recent comments regarding a windfall profits tax has erased many of the positive gains. Statoil is expecting a relative smooth maintenance shutdown for Petrocedenos upgrader (the former Sincor). It appears that the BRV will look for an outsider to replace Vice Minister [Text removed by Aftenposten]. END SUMMARY

--------------------------------------------- -------- MEDIA REPORTS ARE INCORRECT ON STATOILs COMPENSATION --------------------------------------------- --------

2. (C) Petroleum Attache (Petatt) met with Statoil Venezuela President Thore Kristiansen (strictly protect throughout) on February 26 to discuss Statoils views on the current investment climate. Petatt began the meeting by congratulating Kristiansen on the recent signing of two agreements to quantify the reserves of the block Junin 10 in the Faja as well as carry out a development study for the block and PDVSAs payment of compensation to Statoil for its lost equity in the former Sincor strategic association. Dow Jones Newswires reported on February 14 that Statoil received USD 130 million in compensation for the 5.3% equity stake that it lost when the Sincor strategic association was forcibly converted into the Petrocedeno joint venture.

3. (C) Kristiansen stated Statoil was very pleased with the compensation that it received for its lost equity and added that it was significantly higher than "what the Wall Street Journal reported". He reminded Petatt that he has repeatedly stated that Statoil had received a good deal (Reftel A). Although Kristiansen declined to provide details on the compensation package, he noted that PDVSA had five months to pay Statoil. Kristiansen has previously mentioned that the compensation package involved a cash payment with an option to be paid in crude oil (Reftel A). Kristiansen also added the deal has caused some problems for Statoils board. Statoil has a policy of trying to be as transparent as possible with its shareholders. Although the board is convinced the deal is an excellent one for the company, it did not believe that it could release details of it to the shareholders due to BRV sensitivities.

--------------------------------------------- ------------ BRV AND PDVSA SEND POSITIVE SIGNALS TO THE PRIVATE SECTOR --------------------------------------------- ------------

4. (C) When asked about Statoils views on the investment climate in Venezuela, Kristiansen stated they were generally positive. He pointed to three pieces of evidence to justify Statoils optimism. First, Kristiansen stated PDVSA is quite serious about raising production and understands that the private sector will play a key role in raising overall production (Reftel B). Kristiansen said he was actually worried that PDVSA was too keen to raise crude production. He expressed concern that PDVSA would try to raise production levels so quickly that it ended up damaging reservoirs. Kristiansen told the Ambassador during a courtesy call on November 30 that PDVSA had approached both Total and Statoil to increase production at Petrocedeno by 200,000 barrels per day to 400,000 barrels.

CARACAS 00000264 002 OF 003

5. (C) Kristiansen added that PDVSA has stated that it will begin assigning blocks in the Faja for development in the next few weeks. He then noted that "a few weeks" in Venezuela could actually end up being "a few months". During his courtesy call on the Ambassador in November, Kristiansen described the BRV as being "strongly" interested in expansion in the Faja. At the time, he stated his belief that the necessary resources and technology were available for expansion. He repeated the statement to Petatt but noted the number of private sector companies that could partner with PDVSA was limited. (NOTE: During the November meeting, Kristiansen said Sincor originally cost USD 4.2 billion to construct and that to duplicate it in todays market would cost USD 7 to 8 billion. The cost would climb to USD 10-11 billion if PDVSA insisted on a 20% recovery rate. He estimated that it would take 6 to 10 years from the date the partners received a license for the upgrader to enter into production. END NOTE)

6. (C) Kristiansen stated Statoil is also optimistic due to PDVSAs general approach to the Petrocedeno maintenance shutdown. Petrocedenos upgrader shut down at midnight on February 25 for maintenance. The shutdown is scheduled to last 45 days. Petrocedenos fields will continue producing extra heavy crude oil that will then be mixed with lighter crudes for marketing. PDVSA will provide the lighter crudes. Kristiansen stated PDVSA officials initially ignored requests for information regarding the supply of light crudes. However, this quickly changed and they are now promising significantly more crude than Statoil originally anticipated. Kristiansen did not provide details but said Statoil believes Petrocedenos field production will stay above 100,000 barrels per day during the maintenance shutdown.

7. (C) The final piece of evidence that justifies Statoils optimism is the recent performance of senior PDVSA executives at an extra heavy oil conference held in Maturin the week of February 11. Unlike other conferences, all of the scheduled PDVSA speakers showed up and gave presentations that actually contained details. Kristiansen stated it was clear that PDVSAs senior management is clearly wrestling with the best way to develop the Faja. In addition, PDVSA speakers consistently stressed the need for private sector participation.

--------------------------- NOT ALL SWEETNESS AND LIGHT ---------------------------

8. (C) When Petatt opined that the BRV was sending mixed signals and pointed to President Chavez recent suggestion for a windfall profits tax, Kristiansen agreed. (NOTE: Chavez announced on February 17 that his administration was considering the imposition of a windfall profits tax on the oil industry. He did not provide details on the proposal. END NOTE).

9. (C) Kristiansen described the proposal as ridiculous and claimed the BRVs current take, based on PDVSAs equity stake in the joint ventures and the current tax and royalty rates, was 86.7%. As a result, Chavez had little justification for his claim that the oil companies were earning excessive profits. He said Chavez comments were useful due to the fact that he "let the cat out of the closet". Since Chavez did not provide any specifics on his proposed tax, his comments raised the level of risk for companies operating in Venezuela. According to Kristiansen, Statoil will merely require a higher rate of return on Venezuela projects due to the increased risk of ambiguous fiscal terms.

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-------------------- MOMMERS REPLACEMENT --------------------

10. (C) Rumors have been swirling for months that [Text removed by Aftenposten]will be retiring shortly. Several Embassy contacts have speculated that [Text removed by Aftenposten]s replacement will be [Text removed by Aftenposten]. [Text removed by Aftenposten] has a reputation for being a radical Chavez supporter.

11. (C) Kristiansen, who has an excellent working relationship with [Text removed by Aftenposten], told Petatt that he has raised the rumors directly with [Text removed by Aftenposten]. According to Kristiansen, [Text removed by Aftenposten] stated the BRV is looking for [Text removed by Aftenposten]to replace him rather than [Text removed by Aftenposten]. [Text removed by Aftenposten] stated the ideal candidate would have strong administrative skills and would solve problems for Energy Minister Ramirez rather than create them. Kristiansen said he firmly believes [Text removed by Aftenposten]will continue to have a strong policy role after his retirement. DUDDY

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