Wikileaks Watch. Tracking Energy Issues in th US Diplomatic Cables..... So What was hapening in Politics is not lost from Super Power hands. Let see Egypt, Tnisia, Aljazair, and now Libya.... Is it People power play the game.... or other foreign hand paly it so strong.........????

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Ruminations on Equatorial Guinea
15 FEBRUARY 2011
In the spring of 2009, the US embassy in Malabo sent a series of reports on Equatorial Guinea to DC, inspired by changes in both the US administration as well as staff rotations at the embassy. Equatorial Guinea is one of the world's "most isolated but least understood" countries, declared the embassy, while arguing that it was also vital to US energy security interests. “Taking away U.S. energy imports from North America (i.e., those from our immediate neighbors Canada and Mexico), we find that over 30% of our imported oil and gas comes from the Gulf of Guinea region -- more, for example, than from the Middle East," said a May. 21, 2009 memo. "The largest portion of the Gulf of Guinea maritime territory belongs to little EG.  To ignore the security implications associated with the country at the heart of this key region would leave a gaping hole in the map of our national strategy.  Yet, with crypto-sanctions in place and a tiny embassy contingent severely constraining our engagement, that is essentially our policy at the moment.” The memo then proceeded to paint several ominous possibilities for the country: “Several scenarios are possible:  e.g., metastasis of the Niger Delta troubles, replication of the Gulf of Aden piracy, or "Venezuela-ization" of EG.  Our involvement in helping EG improve its security -- particularly maritime security where our interests so firmly overlap -- and to overcome suspicion of its neighbors, will be crucial to avoid drift in these directions. Moreover, better security will help EG relax its de facto state of martial law and lead to improvements in the area of human rights and democracy.  We will only strain bilateral relations with EG if we continue to raise the bar in response to EG efforts and overtures.” As background, Equatorial Guinea emerged in the 1990s as one of West Africa's key producers of crude. "Sudden riches did nothing to immediately address capacity challenges, and the country's search (and acute need) for a mentor left it disappointed. Given its well-established bad reputation, those who have not focused on EG lately will likely find that it is now bigger than it looks, and better than it sounds.   Authoritarian structures are undergoing transformation and the quality of life for average citizens willing to make the effort is improving.  The U.S., without the baggage of the former colonialist powers active in the region or the econo-colonialism of the Chinese, is widely looked to by EG to provide a moral compass for this development.  The recent change in the U.S. administration -- in the country with the highest per capita density of "Obamas" in the world -- was received as a herald of warmer relations.  U.S. involvement is needed to shape EG's future.  Relatively minor U.S. technical assistance and advice in key areas (justice, human rights and democracy, social development, education, conservation, maritime security) will be effective in giving EG the future we want it to have.  It is time to abandon a moral narrative that has left us with a retrospective bias and an ambivalent approach to one of the most-promising success stories in the region.” The memos do appear to back away from a moral narrative; if anything they are quick to defend the regime of President Teodoro Obiang Nguema. “The low level of institutional development and peculiar financial management mechanisms may inflate perceptions of corruption in Equatorial Guinea (EG).  Suddenly rich, the country's over-reliance on now-defunct Riggs bank, a lack of conflict-of-interest rules and a legacy of moonlighting further complicate EG's record.  While significant concerns over the level of corruption remain, and as growing oil revenues fuel the local commercial boom, there are signs EG is moving toward improving public finance management -- and U.S. engagement is helping achieve results.” This wasn't the impression of Human Rights Watch, which released the report Well Oiled: Oil and Human Rights in Equatorial Guinea just months after these memos. "The people of Equatorial Guinea have no ability to hold their government accountable," HRW told International Oil Daily at the time. "Without meaningful international pressure, the immense wealth of Equatorial Guinea will continue to be a private cash machine for a few instead of the means to improving the lives of many." The US embassy took the opposite tack in a Mar. 30, 2009 memo: “EG is a country poorly prepared for the future thrust upon it by oil riches.  While outsiders can be contracted to take care of some of the nuts and bolts issues of development, when it comes to the arch of governance, money alone is not enough to span the yawning capacity gaps.  Though much needs to be done to improve EG society, sometimes the country is simply not ready to undertake the necessary work on its own.  In the meantime, Obiang's "benevolent authoritarianism" provides an ample incubator for positive changes to occur, though there is competition for his attention among the international players.  In any case, at the moment he is unchallenged by any other political figure.” The embassy also provided a fascinating glimpse of the country's new wealth, detailing its "fixation -- perhaps issuing from a population long in the dark -- for street lights. Tens-of-thousands have been erected in anticipation of an electric grid that is not yet capable of delivering power to light them." The past several years since these memos were written have not been good to the country's crude production: "Gas-rich Equatorial Guinea’s oil output is also starting to decline rapidly, dropping below 300,000 b/d last year, although this will be offset by rising gas production and processing," Petroleum Intelligence Weekly reported last month.
POSTED BY Phil Chaffee AT 20:59:00, 0 COMMENTS	SHARE COMMENT
LABELS: ENI (ITALY)
More on the Saudi Cables
11 FEBRUARY 2011
The four Saudi cables referenced below are now up on the WikiLeaks website: Dec. 10, 2007, May 7, 2008, Jun. 3, 2008, and Oct. 23, 2009. Meanwhile former Saudi Aramco executive Sadad al-Husseini contends that the US embassy misinterpreted him in that December 2007 cable. He told Petroleum Intelligence Weekly earlier this week that he "was not disputing the official Aramco oil reserves figure of 260 billion bbl," but instead "was clarifying to US officials that the 716 billion bbl figure revealed by Aramco's then exploration chief, Abdulla Saif, in a Dec. 1, 2007 presentation should not be considered reserves." More on al-Husseini's response here.
POSTED BY Phil Chaffee AT 10:40:00, 0 COMMENTS	SHARE COMMENT
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Australia's Labor May Be Contemplating Indian Uranium Sales
9 FEBRUARY 2011
Though the memos have yet to be uploaded to WikiLeaks, and the Sydney Morning Herald didn't upload them itself, it has a story out today that Australia's Labor government may have been talking out of both sides of its mouth regarding uranium sales to India.   Here's the setup: John Howard's Liberal government made a deal for uranium supply (Australia's one of the top three producers in the world) to India just after the US announced it was working to bring India into worldwide nuclear markets. However, India was locked out of those markets because it had tested a nuclear bomb and it wasn't a signatory to the nuclear nonproliferation treaty (NPT). The Australian Labor Party, which had only recently abandoned its stance against new uranium mines in Australia, had a set policy against uranium exports to non-NPT signatories (meaning India, Pakistan and Israel). So when Labor took power at the end of 2007 with Kevin Rudd, one of the first things to go was the uranium agreement with India. Or so it said in public statements.   But in the leaks obtained by the SMH, senior government minister Martin Ferguson told the US embassy in Canberra that ''a deal to supply India with nuclear fuel could be reached in three to five years''.   Hopefully the actual leaks will be online soon. More to come when that happens!
POSTED BY Phil Chaffee AT 17:40:00, 0 COMMENTS	SHARE COMMENT
LABELS: BG (UK)
Questioning Saudi Capabilities
9 FEBRUARY 2011
The Guardian today released series of memos that haven't yet made it to the main Wikileaks site revealing American worries that Saudi Arabia's ability to act as a swing supplier may be overstated. The embassy devoted one long cable in December 2007 to a meeting with Dr. Sadad al-Husseini, who headed exploration and production at Saudi Aramco till 2004: "Al-Husseini, who maintains close ties to Aramco executives, believes that the Saudi oil company has oversold its ability to increase production and will be unable to reach the stated goal of 12.5 million b/d of sustainable capacity by 2009. While stating that he does not subscribe to the theory of "peak oil," the former Aramco board member does believe that a global output plateau will be reached in the next 5 to 10 years and will last some 15 years, until world oil production begins to decline. Additionally, al-Husseini expressed the view that the recent surge in oil prices reflects the underlying reality that global demand has met supply, and is not due to artificial market distortions." Al-Husseini's dire predictions extended beyond Saudi Aramco: "He stated that the IEA's expectation that Saudi Arabia and the Middle East will lead the market in reaching global output levels of over 100 million barrels/day is unrealistic, and it is incumbent upon political leaders to begin understanding and preparing for this "inconvenient truth." Al-Husseini was clear to add that he does not view himself as part of the "peak oil camp," and does not agree with analysts such as Matthew Simmons. He considers himself optimistic about the future of energy, but pragmatic with regards to what resources are available and what level of production is possible. While he fundamentally contradicts the Aramco company line, al-Husseini is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered." This is actually not far from what al-Husseini told Energy Intelligence's annual Oil & Money conference earlier that year. But the US embassy seemed sympathetic to al-Husseini's analysis, and in the following year and a half issued several memos skeptical of Saudi Arabia's ability to act as a swing producer: May 7, 2008 - "We are concerned that the Saudi energy leadership does not seem sufficiently well-advised on how the current high oil price environment is fueling U.S. election year "resource nationalism," and how this might impact our bilateral relationship in future years. In this vein, King Abdullah's recent comments that Saudi Arabia would cap its production capacity at 12.5 million bpd and leave crude in the ground for its children -- while representing no new initiative or substance -- seemed ill-timed at a moment when the market is looking for calming words from the world's energy market leader." Jun. 3, 2008 - "Our Mission now questions how much the Saudis can now substantively influence the crude markets over the long term. Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period. The May announcement of a 300,000 bpd increase in production barely dented price escalation. It appears unlikely Saudi Aramco could muster the million or more barrels which appear to be needed to make a dent in the normally upwards price trajectory. Saudi Aramco's ability to sustain such a production increase for a year or more raises serious questions. A series of major project delays and accidents over the last couple of years is evidence that Saudi Aramco is having to run harder to stay in place - to replace the decline in existing production." "Additional production would likely come from increasingly heavy crude which the world lacks sufficient capacity to easily refine. The Saudis appear dis-inclined to discount its heavy crude sufficiently, so the market is dis-inclined to purchase it. In neighboring Iran, the regime is now purchasing floating storage for heavy crude which has no takers. While this Mission is far from embracing doomsday "Peak Oil" theorists, Saudi Aramco's challenges are significant."
POSTED BY Phil Chaffee AT 17:00:00, 0 COMMENTS	SHARE COMMENT
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Iran's Quest for Uranium
3 FEBRUARY 2011
Nuclear Intelligence Weekly reported on this in January, when certain memos were leaked to Norway’s Aftenposten newspaper before going up on WikiLeaks websites, but memos from 2009 revealed that the US, Canadian and UK governments worked to block the sale of a Canadian-owned uranium project in Namibia to a shadowy company called George Forrest International (GFI). That privately-owned Belgian company has significant operations in the DRC and throughout Central Africa, and in 2009 led a bid to take over Forsys Metals, which was (and still is) developing the Valencia uranium deposit in Namibia. A Jul. 16, 2009 memo from London revealed that the UK government had already expressed its concerns to the Namibian government “and was confident it [the Namibian government] did not want to run afoul of the sanctions regime, despite some contrary public messages”. Simon Mustard of the UK FCO's Counterproliferation Department told the Americans that “HMG had noticed a pattern of increased travel by Iranian government employees to West Africa, so it shares the U.S. view that Iran is seeking new sources of uranium. With respect to the idea of convening workshops at which uranium suppliers would be able to gather and exchange information about Iranian attempts to procure uranium, the FCO officials agreed it sounded like a good idea in principle and noted they had hosted similiar workshops in the past for uranium exporters.” An Aug.12, 2009 memo from DC contending that the US has “information that links GFI to ongoing discussions with senior Iranian officials” gave the following background: “Iran does not have sufficient uranium reserves to sustain its planned nuclear power reactor program. Even though it has two uranium mines * Gachine mine in Bandar Abbas and Saghand mine in Ardakan * according to data Iran provided to the OECD and IAEA, Iran's total known and speculative uranium resources represent less than a quarter of the amount needed to supply the 40-year life-cycle of seven reactors, which was Iran's initial stated goal. Additionally, unclassified calculations suggest that Iran will run out of its current stock of uranium ore concentrate (yellowcake) in 2010. Consequently, Iran is actively looking for outside suppliers to build up its stockpile.” After being notified of this intelligence, Ottawa scrambled for a bit to come up with the proper legal authority to halt the sale of Forsys, before quickly halting the sale for 45 days. By September GFI had read the tea-leaves and withdrawn its takeover offer. Today Forsys continues to slowly develop the Valencia project, but it’s not going anywhere fast: while it has abundant uranium reserves, Namibia’s deposits are notoriously low-grade, and developing a mine from scratch requires many costly infrastructure investments. With that said, the country already has two major uranium mines in operation, one of which – Rio Tinto’s Rossing mine – in 1982 shipped the bulk of the uranium now being enriched at Natanz to Iran.
POSTED BY Phil Chaffee AT 14:00:00, 0 COMMENTS	SHARE COMMENT
LABELS: INA (CROATIA)
Qaddafi's Sons ("Undisciplined Thugs") and a "Kleptocratic" Regime
2 FEBRUARY 2011
Shokri Ghanem's close friend described Libyan leader Muammar Qaddafi's sons as "undisciplined friends," according to the US embassy in Tripoli. But if they are thugs, they are extremely powerful thugs, at least several of whom could be poised to take over the country after their father. (Energy Compass recently reported that "Libya's Muammar Qaddafi looks secure, his position assured by a web of tribal alliances. Libya watchers ruminate on the rivalry between two Qaddafi sons, Seif and Muatassim, for signs of who's best-placed to succeed.")   Other memos give describe various sons and their increasing profiles:   Aug. 12, 2008 - "Libya's maritime business, in which Hannibal al-Qadhafi (son of Muammar al-Qadhafi) plays a large role, appears to be another key sector of Libya's economy that effectively falls under the al-Qadhafi family's sway.  Projected increases in Libya's oil and gas production in the next 5-8 years are expected to generate concomitant growth in the maritime component of hydrocarbon transportation and production.  Libya's private and state-run companies, which have a majority of that business, are expected to grow and retain their control of that lucrative sector.  The use of government funding to capitalize Hannibal's "private" maritime transportation company, together with the fact that the national maritime transportation in which he plays a large role quickly halted Libyan oil shipments to Switzerland in response to Hannibal's recent detention in Geneva, highlight the close integration of private and public interests in many of Libya's key economic entities. Despite the ostensibly egalitarian nature of al-Qadhafi's "Jamahiriya", the reality is that the al-Qadhafi family and its close political allies own outright or have a considerable stake in most things worth owning, buying or selling in Libya." "Hannibal's stake in Mariner and prominent role in the GNMTC afford another example of the kleptocratic nature of al-Qadhafi's regime.  While the Jamahiriya political ideology espoused by Muammar al-Qadhafi owes an intellectual debt to socialism and includes hefty doses of pseude-egalitarian rhetoric, the reality is that the al-Qadhafi family and its political loyalists own outright or have a considerable stake in most things worth owning, buying or selling in Libya (ref E). The extent and nature of the family's economic activities are deliberately obscured to help deflect public scrutiny and allegations of corruption; however, Hannibal's stake in Libya's maritime sector - like those of his siblings in other industries - is an open secret in Libya's small, closed society.  The quick decision by the GNMTC to halt oil shipments to Switzerland in response to Hannibal's detention in Geneva throws into stark relief the seamless private-public nature of many of Libya's key economic entities, a reality that will complicate nascent efforts to encourage economic reform and greater transparency."   Nov. 6, 2008 - "While the GOL wants to preserve room for maneuver with respect to energy and arms purchases, several reliable Libyan interlocutors noted that Libya's relationship with Russia has never been genuinely warm. "Libyans believe Russians are too dour and are not trustworthy", one contact with regime ties told us.  The fact that Muatassim al-Qadhafi featured in the visits is an interesting development, suggesting that he is becoming a more seriously-regarded player in the regime.  Our Russian interlocutor bemoaned Moscow's lack of understanding of intra-Libyan regime dynamics, noting that Muatassim was initially scheduled to meet only mid-level bureaucrats until the Russian Embassy in Tripoli intervened to explain that he was a potential successor to his father.  His reports from Moscow were that Muatassim took a clear lead in his meetings, albeit with Musa Kusa at his side as an advisor, and comported himself reasonably well." Jan. 22, 2009 - "THE SENSE IN TRIPOLI IS THAT THE REGIME IS IN THE MIDST OF ANOTHER OF ITS PERIODIC EPISODES OF POLITICAL FERMENT.  THE FAILURE TO REACH AGREEMENT ON HOW TO IMPLEMENT AL-QADHAFI'S GOVERNMENT RESTRUCTURING AND PRIVATIZATION PROPOSALS, TOGETHER WITH INCREASINGLY PERSISTENT SPECULATION ABOUT SAIF'S ROLE AND THE RELATED ISSUES OF A CONSTITUTION AND POSSIBLE ELECTIONS, HAVE RAISED DIFFICULT QUESTIONS FOR A REGIME POSSESSED OF LIMITED BUREAUCRATIC CAPACITY.  DOMESTIC DISCORD HAS ALSO RECENTLY BUBBLED TO THE SURFACE AGAIN, WITH TRIBAL VIOLENCE IN KUFRA (REF I) AND ATTACKS BY REGIME ELEMENTS AGAINST BERBERS IN YEFREN (REF J).  IN THAT REGARD, THE GLOBAL FINANCIAL CRISIS AND EVENTS IN GAZA HAVE COME AT AN OPPORTUNE TIME FOR A REGIME STRUGGLING TO FORMULATE A PLAN FOR THE WAY AHEAD ON POLITICAL AND ECONOMIC REFORM, GIVING IT A PLAUSIBLE PRETEXT TO POSTPONE PUBLICLY DECLARING ITS HAND.  MORE CYNICAL LOCAL OBSERVERS HAVE SPECULATED THAT AL-QADHAFI'S PLAN ALL ALONG WAS TO PROPOSE DRAMATIC REFORMS AS A WAY TO SHIFT THE GOALPOSTS OF EXPECTATION, ALLOWING HIM TO LATER APPEASE RELUCTANT OLD GUARD ELEMENTS BY SCALING BACK THE EXTENT OF THE CHANGES TO SOMETHING CLOSER TO WHAT THEY (AND HE) ARE COMFORTABLE WITH WHILE SIMULANEOUSLY CLAIMING TO WOULD-BE REFORMISTS (INCLUDING SAIF AL-ISLAM) THAT HE DIQS BEST TO OVERHAUL THE JAMAHIRIYA SYSTEM." Feb. 11, 2009 - "The GOL, anxious that the new U.S. administration could adopt markedly different policies towards Libya, has in the past several weeks taken a number of steps - a direct video conference (DVC) by Muammar al-Qadhafi with Georgetown University students, a New York Times editorial and a letter to POTUS - that appear to be part of an orchestrated effort to engage the new U.S. administration and remind it of Libya's strategic importance.  The outreach coincided with other recent, positive steps: the first U.S. Ambassador to Libya in 36 years presented credentials, the GOL invited the U.S. Africa Command's General Ward to visit and a senior Libyan delegation visited Washington and signed a memorandum of understanding on military-to-military cooperation."  "Nonetheless, manifestations of lingering ambivalence about re-engaging with the U.S. simultaneously emerged on the ground here.  At a public conference, a senior regime figure excoriated Libya's political opposition, decried restored U.S.-Libyan relations as "a great sin" and called on Libyans to shun the new U.S. Ambassador, whom he described as "a rotten dog."  A senior MFA Americas Department official demarched us to protest the Ambassador's anodyne remarks on human rights and the GOL has resurrected a periodic campaign to prevent Emboffs from contacting GOL entities directly.  A well-informed contact was recently told by the head of a state-owned company (who is a son of Muammar al-Qadhafi) that dealing with the U.S. was still "extremely sensitive", that his company would rather pay private consultants than obtain assistance gratis from the USG and that the contact (a U.S. citizen) should minimize meetings with Emboffs to avoid creating the "wrong impression" among GOL officials.  Finally, the National Oil Corporation (NOC) renewed its campaign to solicit contributions to the U.S.-Libya comprehensive claims settlement fund, telling international oil company representatives at a meeting on February 1 that they "must contribute" to the fund by February 28 or suffer "serious consequences"."
POSTED BY Phil Chaffee AT 12:05:00, 0 COMMENTS	SHARE COMMENT
LABELS: NNPC (NIGERIA)
The Environmental Repercussions of Libyan Oil
2 FEBRUARY 2011
Jun. 16, 2008 - "Libya is slowly acknowledging the need to address the environmental impact of its oil and gas production. Environmental issues are becoming more central to the Libyan oil and gas industry, particularly with the influx of foreign companies, which often have a corporate mandate to operate in an environmentally-conscious manner, and the drive to expand production.  In practical terms, though, the GOL's involvement in and concern about environmental issues remain marginal. Significant shortcomings in the regulatory framework and legal system remain; spotty enforcement and a lack of environmental remediation facilities are key issues." Aug. 27, 2008 - "On August 19, a storage tank for crude oil caught fire during routine maintenance operations in Ras Lanuf, the site of Libya's largest oil refinery and a petroleum port. The fire was isolated to one tank after burning for two days. There were no casualties and oil exports from the port of Ras Lanuf were not immediately affected.  The long-term impact on production and the tank farm is not yet clear.  The incident highlighted, however, shortcomings in the capacity of Libya's National Oil Company (NOC) and the Government of Libya to respond to such incidents." "According to Ian MacIntosh (strictly protect), General Manager of Petro-Canada in Libya, the fire began the morning of August 19 inside one of the thirteen tanks at the Ras Lanuf facility, and pressure caused by the fire helped prompt a leak of oil through a faulty valve at ground-level.  Oil spread into a ditch, surrounded by a dirt berm encircling the tank.  That oil then caught fire as well, further heating the tank from outside. The tank in which the fire began has a capacity of 460,000 bbl. The structural integrity of the tank remained intact; however, there were concerns about whether that would hold.  MacIntosh noted that public remarks by NOC Chairman Shukhri Ghanem that most of the oil in the tank was from fields developed by Petro-Canada were misleading.  Only 2-4% of the oil in the tank was Petro-Canada's; the rest was NOC oil.  Ghanem has also said that production would have to be reduced from 70,000 to 100,000 barrels per day (bpd); however, McIntosh told PolEcon Chief that Petro-Canada has not yet concluded that such would be the case."
POSTED BY Phil Chaffee AT 11:30:00, 0 COMMENTS	SHARE COMMENT
LABELS: NNPC (NIGERIA)
Shokri Ghanem: Principled Reformer or "Jealous" Autocrat?
2 FEBRUARY 2011
The US embassy received wildly varying impressions of Shokri Ghanem, Libya's powerful oil minister, from two sources in 2008:   Jul. 13, 2008 - "A close friend of National Oil Corporation (NOC) Chairman Shukri Ghanem told us that Ghanem is under pressure to provide $1.2 billion in cash or oil shipments to National Security Adviser Muatassim al-Qadhafi (son of Muammar al-Qadhafi), and may seek to resign soon out of fear that Muatassim or his confederates could seek revenge if the funds are not forthcoming.  Muatassim reportedly intended to use some of the funds to establish a military/security unit and to support unspecified security upgrades he wanted to make in his capacity as National Security Adviser."  "Muammar al-Qadhafi, anxious to give the appearance of a pro-reform agenda, had recently asked Ghanem whether he would consider serving again as Prime Minister (a post he occupied in 2004-2006) after a government shake-up later this year.  Frustrated by the efforts of conservative regime elements to block needed economic and political reforms - Ghanem does not assess that meaningful economic and political reform are possible until al-Qadhafi passes from the political scene - Ghanem did not accept and is looking for a way to politely decline without offending al-Qadhafi."  "Speculation about whose star is waxing or waning is a favorite subject of Tripoli's chattering classes and it remains to be seen whether Ghanem makes good on intention to step down; however, it appears there may be something to the claim that Muatassim approached him for a substantial sum of cash.  The reported attempts by al-Qadhafi's sons to use the NOC as a personal bank, together with Ghanem's pessimism about the prospects for meaningful reform, suggest that the regime remains unchanged with respect to the way it conducts key elements of its business." "Ibrahim el-Meyet (strictly protect), a prominent Tripoli-based attorney and business consultant, told CDA on July 10 that Dr. Shukri Ghanem, Chairman of Libya's National Oil Corporation (NOC) intends to tender his resignation to Muammar al-Qadhafi soon, perhaps as early as the coming week. (Note: el-Meyet was a Libyan MFA official during the pre-revolutionary period of the Sanussi monarchy; his assignments included London, Paris, Cairo and New York, where he was a member of Libya's UN delegation.  End note.) El-Meyet has known Ghanem for more than forty years and considers him a close friend.  The two lived in London during the same period in the early 1970's, and their families socialize together at least once a week.  El-Meyet spoke with Ghanem on July 5."  "AN INDECENT PROPOSAL  3. (S/NF) El-Meyet said Ghanem felt compelled to resign because National Security Adviser Muatassim al-Qadhafi, a son of Muammar al-Qadhafi, had approached him in late June with a request for $1.2 billion.  Muatassim suggested that if Ghanem could not quickly generate such a large sum in cash, he would be willing to accept oil allotments that he could sell privately as an alternative way to generated the funds.  (Note: El-Meyet said other sons of al-Qadhafi (NFI) had recently levied demands for oil allotments that they could sell privately as well.  End note.)  Muatassim refused to say what the money would be used for, but el-Meyet said Ghanem had learned from another well-connected source that Muatassim intended to use some of the funds to establish a military/security unit akin to that of his younger brother, Khamis, and to defray the expense of unspecified "security upgrades" he wanted to make in his capacity as National Security Adviser."  "AL-QADHAFI'S SONS - "UNDISCIPLINED THUGS"  4. (S/NF) Ghanem informed Muammar al-Qadhafi in early July about Muatassim's request.  Al-Qadhafi laughingly dismissed it and flatly told Ghanem to ignore it; however, according to el-Meyet, Ghanem is "genuinely concerned" that Muatassim or his confederates could seek revenge against Ghanem or his family if Muatassim does not receive the funds and/or learns that his father was informed of the request.  The courtly el-Meyet was unusually blunt in assessing al-Qadhafi's children as "undisciplined thugs", noting that "no one can cross or refuse such people (the al-Qadhafi family) without suffering consequences, particularly when the matter is to do with money".  5. (S/NF) In a long conversation with el-Meyet on July 5, Ghanem said that given the potential danger to him and his family stemming from Muatassim's request, he sees little choice but to resign.  He had already drafted a letter of resignation and was waiting for al-Qadhafi to get through visits by Spanish Foreign Minister Moratinos (who was in town July 10) and the Union for the Mediterranean summit in Paris (on July 13) before submitting it.  Noting that Ghanem was "the only real reformer left" in the GOL, el-Meyet expressed concern that Ghanem's resignation would seriously impact the GOL at a critical time."   Dec. 1, 2008 - "In a recent meeting, a 15-year veteran of Libya's National Oil Corporation (NOC) gave an insider's account of widespread dissatisfaction with NOC Chairman Shukri Ghanem's management style.  Autocratic, jealous of his prerogatives and inclined to rely on a small, subservient team, Ghanem has driven many experienced managers into the private sector and allowed key positions on the NOC's critical management committee to go unfilled, diminishing the NOC's administrative capacity. International oil companies (IOC's) have benefited to an extent by hiring some experienced former NOC employees; however, there are concerns that if the NOC's human capacity is denuded much further, it will cease to be a viable working partner.  Ghanem's reluctance to meet regularly with IOC general managers and his lack of technical expertise have left him isolated and ill-informed at a critical juncture in which Libya is seeking to significantly expand oil production." "P/E Assistant met with Karima el-Mshawet (strictly protect), a 15-year veteran of Libya's state-owned National Oil Corporation (NOC) on November 18.  El-Mshawet started in the Financial Department, then moved to the Human Resources Department as a training program coordinator and currently works in the Internal Auditing Department." "Changes in the ranks of the NOC's senior, experienced personnel due to personality conflicts with Ghanem have also taken a toll.  Several former members of the NOC's key management committee who had repeatedly resisted entreaties from private sector employers have departed in recent years rather than continue working for Ghanem.  Ahmed Aoun, former head of planning, studies and projects for the management committee, moved to Shell as a deputy managing director.  Ibrahim Elsoul, former head of financial and administrative affairs for the management committee, took a job in banking in Tunis.  NOC Vice Chairman Faraj Said is due to retire this year and, according to el-Mshawet, he probably will not stay any longer than he has to."  "ConocoPhillips GM Page Maxson (strictly protect) recently told us that IOC's were in a tough position.  On the one hand, competent Libyan managers were at a premium; on the other, there was concern that Ghanem could drive out so many qualified staff that IOC's would no longer have a competent national authority (the NOC) with which to work, a critical problem in a country in which all work on oil and gas is run by the NOC."  "Despite his eagerness to speak with the international media, particularly about OPEC production and macro-economic factors affecting oil and gas (other senior OPEC officials reportedly refer to him as "the Libyan media whore"), el-Mshawet said most NOC professionals share the view that Ghanem lacks the technical and management skills to properly manage the organization.  IOC general managers (GM's) are almost universal in agreeing with that assessment."   "British Gas GM Peter Thompson (strictly protect) told P/E Chief that Ghanem's mistaken belief that he knows everything, together with his autocratic style of management, had left him isolated and ill-informed.  Former ConocoPhillips GM Page Maxson (strictly protect) told P/E Chief that Ghanem was much less willing to meet with and hear out IOC GM's than his predecessor had been.  Maxson typically saw al-Badri, Ghanem's predecessor, at least once a week and enjoyed a candid, collegial relationship with him. By contrast, he typically only saw Ghanem when ConocoPhillips' CEO is visiting and the tone was almost always combative (Note: Maxson was recently transferred to another post outside Libya.  End note.) Other GM's have told us that Ghanem is in some respects a throwback to the circa-1970's Libyan oil managers, who viewed IOC's through a nationalist lens and considered them to be predatory entities which had to be carefully managed."
POSTED BY Phil Chaffee AT 11:40:00, 0 COMMENTS	SHARE COMMENT
LABELS: NNPC (NIGERIA)
Tripoli: Looking Beyond Hydrocarbons
2 FEBRUARY 2011
Another feature the embassy memos out of Tripoli return to repeatedly is the desire on the part of the government of Libya to diversify its economy:   Oct. 30, 2008 - "Noting that there was plenty of interest in oil and gas exploration and production, which benefitted from well-organized investment under the auspices of the National Oil Corporation's Exploration and Production Sharing Agreement scheme, Bengadara [Libyan Central Bank (CB) Governor Farhat Omar Bengadara] stressed that the CB's efforts were targeted at securing FDI in non-hydrocarbon sectors such as agriculture and tourism.  There was also room for more FDI in downstream hydrocarbon industries such as petrochemical production and refining (Libya imports most of its gasoline from Italian refineries).  Echoing a line we've heard from other senior GOL officials, he said Libya - with its strategic location, long shoreline and multiple port facilities - wanted to become a regional center for travel, banking and investment akin to Dubai." Nov. 26, 2008 - "The head of Libya's national economic planning apparatus and the effort to implement Muammar al-Qadhafi's vision for government restructuring and privatization told the visiting NEA/MAG Director that a new, commonly agreed frame of reference for U.S.-Libya relations that took into account more than oil was needed.  Libya's strategic location, aversion to extremist iterations of Islam and hydrocarbon resources will make it increasingly important in the coming decade.  The U.S. would do well to focus more on cultivating people-to-people relationships by engaging more on health care, education, technology and training, and should not expect "all or nothing" from Libya by way of its political and economic choices."
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LABELS: NNPC (NIGERIA)
Developing Libyan Oil
2 FEBRUARY 2011
In 2008 and early 2009 the US embassy in Tripoli issued a series of memos detailing the various developments in the Libyan oil sector. It noted the following developments: an exploration by Russia’s Tatneft; a series of 30-year contracts between Libya’s National Oil Company (NOC) and Petro-Canada; extensions for a pair of exploration and production sharing agreements (EPSAs) with Spain's Repsol, France's Total, Austria's OMV, and Norway's Saga Petroleum; the launch of Libya's third privately-owned fuel distribution company; and discoveries by Germany’s RWE. It also provided a comprehensive and incredibly detailed overview of the commercial developments in Libya in November. But the embassy also met with international oil executives and leaders within Libya's government-owned companies to provide a more analytic look at developments: Jun. 17, 2008 - "Soaring oil prices are allowing Libya to press for more stringent long-term contracts with foreign oil and gas producers...Despite Libya's relatively unique position in terms of unproven reserves, high quality oil and low recovery costs, observers here expect that some IOC's facing potentially long renegotiation periods and dramatically reduced production shares may choose to abandon production efforts in Libya." Jul. 8, 2008 - "While Chevron continues to assess new EPSA opportunities in Libya, the company has reportedly adopted a fairly conservative approach to bidding that would likely disadvantage the company's efforts to secure new acreage in future EPSA bidding rounds.  Oil and gas contacts have noted Chevron's reluctance to adopt the prevailing "auction mentality" and accede to draconian EPSA terms, particularly low production shares, that the NOC is currently stipulating.  Chevron's Houston headquarters is still hoping to obtain a "development resource opportunity" for acreage currently under production, likely under the rubric of a Development and Exploration Production Sharing Agreement (DePSA); however, recent remarks by NOC Chairman Shukri Ghanem (reftel) suggest that a DePSA round isn't likely to occur anytime soon.  Barring a major find in Marzuq, which seems unlikely, or a significant shift in the company's bidding philosophy, it appears that Chevron's window of opportunity in Libya may well be closing." Jul. 13, 2008 - "The long-awaited ratification of Oxy's contract extension in Libya has solidified its position as one of Libya's leading oil and gas players...A two-person NOC negotiating team worked on all three agreements (Eni, Petro-Canada and Oxy).  The NOC's driving force behind the negotiation process was Assam Ali Elmessallati, who bears the title Committee Member for Investment and Joint Venture Follow-Up." "According to Winterman [John Winterman, Oxy's Country Manager for Libya], Elmessallati stalled negotiations with Eni (the first of the three agreements that the NOC tackled), pulling a near-final agreement off the table in order to conduct further "internal reviews".  According to Winterman, Elmessallati conducted "an internal socialization process" in which he circulated the agreement broadly to get as many Libyan government "fingerprints" on the deal as possible. His past role as architect of the EPSA IV process likely informed the effort, which garnered enough buy-in for the deal to move forward without the threat of last-minute opposition from parties who would have gone unconsulted absent his efforts.  Winterman also noted that it was vital that these new EPSA deals be presented General People's Committee (Cabinet-equivalent) as "extensions" verses, as opposed to new deals that would have to be re-bid from scratch." "Although the concession extensions carry some positive aspects, the fact that the NOC may be prepared to reopen negotiations with the Oasis group is troubling.  If the Waha consortium is forced to renegotiate after cementing a deal less than three years ago at a cost of $1.8 billion, can it - or any other IOC operating in Libya - reasonably expect that the new agreements will stand the test of time?  Given the GOL's political approach to economic policymaking, as well as its penchant for extracting maximum concessions for production of its hydrocarbon resources, how long would revenue from oil that could hit $175 or $200/bbl oil be allowed to accrue to foreign companies before the GOL would (again) seek a larger cut?  While the answer to that question remains to be seen, it is clear is that the recent contract extensions have set Eni, Petro-Canada and Oxy apart as leaders in the Libyan energy sector. It is expected that they will account for at least 55% of Libya's total oil production if the terms of their contracts are fulfilled." Jan. 30, 2009 - "Famous for saying the unexpected (a favorite local saying is "from Libya comes the new"), al-Qadhafi did not disappoint with his threat to nationalize Libya's oil production.  As with similar dramatic, headline-grabbing statements on various other subjects in the past, though, much of what he says and does represents tactical maneuvering rather than a sincere expression of intent.  While it is never wise to rule out the possibility of seemingly irrational decisions by the GOL, we are not inclined to believe that nationalization is being seriously considered.  Floating the idea helps leverage the GOL's position with respect to renegotiating existing oil production contracts and (potentially) garnering contributions to the claims compensation fund.  More important in the immediate sense, though, is that it clearly signals the extent to which sagging oil prices and the global financial crisis have hurt oil-dependent economies like Libya's, helping pre-empt criticism from abroad if/when Libya makes further unilateral production cuts below OPEC-dictated levels and from regime elements when big ticket development projects are scaled back or cut at the upcoming session of the GPC.  In that regard, al-Qadhafi's real intent may have been to shift the goalposts of debate so that the steps he ultimately takes seem palatable by comparison with the specter of what could have been."
POSTED BY Phil Chaffee AT 16:35:00, 0 COMMENTS	SHARE COMMENT
LABELS: NNPC (NIGERIA)
Bombs in Putin's Pockets?
1 FEBRUARY 2011
When Vladimir Putin, then the president of Russia, visited Tripoli in the spring of 2008, there were intensive discussions beforehand as to the protocol. Here's how the US embassy related one second-hand anecdote from those preparations:   “When the Russians informed [Libyan Chief of Protocol (and Qadhafi confidant) Nuri] al-Mismari that Putin would be accompanied at all times by an assistant carrying Russia's nuclear launch codes, al-Mismari blew up: "Libya has made a decision to get rid of its nuclear weapons. We will not let you bring your nuclear weapons here!" Russian diplomats explained to al-Mismari that Putin would be traveling with codes and not/not [sic] the nuclear weapons themselves.”
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Tripoli's Pursuit of Nuclear Energy
1 FEBRUARY 2011
After Libyan leader Muammar Qaddafi gave up the Libyan WMD program in late 2003, he didn't abandon his interest in a nuclear energy program for the country. Indeed, within years Tripoli was signing a nuclear cooperation agreement (NCA) for nuclear power with Paris.   But France, one of the largest civilian nuclear suppliers in the world, moved slowly on the Libyan front, and Libya quickly started courting other countries, including Russia, the US, and South Korea:   Apr. 8, 2008 - "Although the Russian Embassy has received "nothing official" from Moscow, it expects Russian President Vladimir Putin to visit Libya by the end of April. Putin's projected travel to Libya is the "primary issue" in Libyan-Russian relations; in a recent meeting with Emboffs, the Russian DCM stressed that Libyan leader Muammar Qadhafi has repeatedly made it clear he expects the visit to happen. During the visit, according to the Russian Embassy, Russia hopes to sign a general framework agreement on civilian nuclear cooperation, and military equipment sales will likely feature prominently in discussions. The Russian DCM also briefed Emboffs on a joint Russian-Libyan military cooperation council and ongoing Russian commercial ventures in the oil/gas and construction sectors." "According to [Russian DCM Anatoly] Martinov, Russia intends to capitalize on a "golden opportunity" to sign a general framework agreement on civilian nuclear cooperation during Putin's April visit. Cooperation on atomic energy has to date been limited to sales of equipment for Libya's experimental reactor facility at Tajoura, including water management and fire suppression technology. Stressing that Russia "had no particular (civilian nuclear) projects in mind", Martinov said Russia is ready to sign a nuclear framework agreement that could facilitate future cooperation on power generation and desalinization projects. We've heard from other diplomatic contacts that the Russians hope to expoit the fact that French-Libyan civilian nuclear cooperation has not progressed to the GOL's satisfaction since a parallel agreement was signed during President Sarkozy's visit to Libya last summer." Apr. 24, 2008 – “After years of preparation, Russian President Vladimir Putin, accompanied by 400 assistants, journalists and business executives in six planes, visited Libya on April 16-17 primarily to secure an agreement on Libya's sizeable Soviet-era debt. Libya and Russia agreed to swap the $4.5 billion debt for a large railroad contract and several future contracts in housing construction and electricity development. At Libyan insistence, the two sides signed an MOU committing them in principle to formalize a civilian nuclear agreement by the end of 2008. While Russian diplomats in Tripoli maintain that Putin did not have a political agenda for his visit, Libyan leader Muammar Qadhafi used the opportunity to claim he opposes NATO expansion to Ukraine and Georgia and to advocate for his one-state solution to the Israel/Palestine problem. Putin also raised -- without success -- the case of a detained Russian national and LUKoil employee who remains in pre-trial detention since his arrest under unclear circumstances in November 2007.” “During the visit, the two sides also signed -- at Libyan insistence -- an MOU committing both sides to side a formal cooperation agreement on civilian uses of nuclear energy by the end of 2008. Kozlov noted that Libya hoped to sign a formal civilian nuclear agreement during the visit; however, no language had been agreed to before the visit and Russia refused to sign without further consultations. Kozlov reiterated that the civilian nuclear agreement will establish a general framework for future cooperation and will not/not include any specific projects. Current Libyan-Russian cooperation on the peaceful uses of nuclear energy -- limited to a few Russian technical experts working at the Tajoura nuclear facility -- is based on an "outdated" Soviet-era agreement with Libya; according to Kozlov, Russia hopes to "modernize" the framework for nuclear cooperation. He added that the Libyans are chiefly interested in acquiring nuclear-powered water desalination technology and that Libya is stringing along several possible sellers, including France, before it decides what to buy. Noting Libyan dissatisfaction with slow progress on Libyan efforts to purchase civilian nuclear technology from France following President Sarkozy's July 2007 visit to Libya, Kozlov cautioned that the Russian side made clear that any Russian sales will not/not be quicker than the French deal.” May.8, 2008 – “A senior National Security Council official asked what the USG's views were on the possibility of U.S.-Libya civilian nuclear cooperation and on sales of lethal military equipment to Libya. Building a nuclear reactor for peaceful uses, principally power generation and water desalination, is a key GOL priority and Libya would prefer that a U.S. company and/or the USG provide technical guidance and/or undertake construction efforts. The official stressed that the GOL is anxious to resolve outstanding bilateral political irritants (terrorism-related claims in U.S. courts, the Lautenberg Amendment) before the current U.S. administration's term expires to ensure greater bilateral cooperation and U.S. commercial activity in Libya. It was not clear that the requests for the USG's views on civilian nuclear cooperation and lethal military equipment sales had been fully coordinated with other elements of the GOL.” “In a meeting with the CDA on May 7, Dr. Hind Siala, Director of Foreign Liaison and International Cooperation at Libya's National Security Council (NSC), asked what the USG's views were on the possibility of U.S.-Libya civilian nuclear cooperation. Siala said building a nuclear reactor for peaceful uses, to include power generation and water desalination, is a GOL priority. According to Siala, the GOL would strongly prefer that U.S. companies, in concert with the USG, provide technical guidance and/or undertake construction. If U.S. companies and/or the USG are not interested in participating in such a project directly, the GOL wants assurances that the USG would approve Libya offering an international tender for construction of a civilian reactor by third-country parties.” “The CDA noted media reports claiming the GOL had signed civilian nuclear cooperation agreements with France during President Sarkozy's visit to Tripoli in July 2007, and with Russia during President Putin's visit in April. (Note: As reported ref A, at the GOL's insistence, Libya and Russia signed a memorandum of understanding committing them to finalization of a formal cooperation agreement on civilian uses of nuclear energy by the end of 2008. The GOL hoped to sign the formal agreement during Putin's visit; however, no language was agreed to before the visit and Russia refused to sign without further consultations. Russian contacts here claimed the formal agreement - if signed - would only establish a general framework for future cooperation and would not/not be keyed to any specific projects. End note.) Siala averred that U.S.-Libya civilian nuclear cooperation would complement, not contradict, parallel efforts with France and Libya. Conceding she is not fully briefed on Libya's nuclear aspirations, she did not know how many reactor plants the GOL envisages building; however, she reiterated that desalination was a primary goal.” Jan. 7, 2010 – “The Ambassador of the Republic of Korea to Libya, Dong Hee Chang recently told the Ambassador that his country was interested in advancing its civil nuclear cooperation with Libya and wanted to know if the U.S. had any objections. He said the South Korean Embassy in Washington had broached this topic with U.S. officials in Washington and had not received any reply. (It is unclear which USG agency or office was contacted.)Specifically, South Korea would like to provide nuclear reactors for power generation to Libya. South Korea's Ambassador told the Ambassador that any potential South Korean civil nuclear cooperation with Libya would be fully coordinated with the IAEA. Over the last year, Libya has stepped up its civil nuclear programs, signing agreements for similar cooperation with France, Argentina, Canada, Ukraine and Russia. Senior Libyan officials, including Muammar al-Qadhafi, have told us that Libya seeks similar cooperation with the United States.” Feb. 3, 2010 - "In addition to the NMC project, Gashut expressed GOL interest in signing a bilateral cooperative agreement on the peaceful applications of nuclear energy. He reviewed two approaches the Libyans had made to the USG on this proposal, first in 2008 prior to the visit of then-Secretary of State Condoleezza Rice, and then during National Security Advisor Muatassim al-Qadhafi's April 2009 visit to Washington, when the Libyan Embassy submitted a draft agreement to the Department. Gashut said that Libya sought U.S. support for its plans to build the first nuclear power plant in the country: "We need your assistance so that both sides can benefit from these developments.""
POSTED BY Phil Chaffee AT 13:20:00, 0 COMMENTS	SHARE COMMENT
LABELS: NNPC (NIGERIA),RELIANCE
Repsol and the IOCs in Venezuela
28 JANUARY 2011
This series of memos from Caracas reveal in great detail the politics and realities on-the-ground faced by many of the IOCs operating in Venezuela. ·  Aug. 5, 2009 – A memo from the US Caracas embassy on Spanish oil company Repsol’s operational problems in Venezuela is far from sympathetic: “Repsol's problems in securing launch vessels and diesel fuel underscore some of the unintended consequences of GBRV nationalizations of downstream operations and the oil services sector.  Its inability to secure specialized drill tools from Schlumberger confirms reports that companies are quietly removing capital equipment from Venezuela.” ·  Sep. 14, 2009 – On Sep. 11, 2009, Venezuelan President Hugo Chavez announced that Repsol had made a major natural gas discovery of some 7 to 8 trillion cubic feet in the Gulf of Venezuela – an announcement that was quickly confirmed by Repsol itself. But experts from competing companies operating in Venezuela quickly poured cold water on the announcement, saying that while the resource might be substantial the announcement was undoubtedly premature: “A British Petroleum employee seconded to a PDVSA joint venture told EmbOff that the umbers announced by Chavez resembled an earlier, pre-exploration estimate by his company.  Chevron's Commercial Manager for Block 2 of the off-shore Platforma Deltana PD2) in Eastern Venezuela, Bret Tarpley (strictly protect throughout), told Petroleum Attache (PetAtt) that if the field is as large as announced, it would be about the same size as PD2.  He thought it premature for Repsol to announce the numbers (NOTE: Repsol has only reiterated the numbers announced by Chavez) and was sure that Repsol had not yet tested the reservoir.  He noted that Chevron had drilled four test wells in PD2 before it could confirm the reservoir's size and added that a geologist with ENI shared that it had found "a mall section of potential pay" in the Gulf of Venezuela.” The US embassy in Caracas was cautious in its evaluation: “It is not clear what the real size and characteristics of the newly discovered reservoir are, though 7-8 TCF of natural gas appears to be the upper limit. Venezuela originally launched the Rafael Urdaneta project in the Gulf of Venezuela in order to increase domestic supply. In fact, western Venezuela is dependent upon natural gas from Colombia for domestic residential and industrial demand. Since the government provides subsidized natural gas to domestic users, an international oil company will find developing a profitable business model challenging. It is not unusual for President Chavez's announcements to be erroneous in fact, but accurate in direction.  Earlier this summer he announced the completion of a test well in the Dragon block of Mariscal Sucre.  Post later learned that in reality, the drill team had actually only completed drilling to the well's third zone (depth) of five planned zones. However, what is not in question is Venezuela’s actual record of developing its off-shore natural gas resources. Venezuela has been talking about the development of natural gas off Eastern Venezuela for the last twenty years but has yet to build a natural gas train.  During the same period, Trinidad & Tobago has completed at least four LNG trains.” This analysis was in line with that of World Gas Intelligence, which noted in its reporting on this that “experts inside Venezuela are cautious, pointing to market constraints that threaten to derail all oil and gas production in the country's offshore -- and pointedly noting that Repsol has so far drilled only one well in the block in question.” WGI also noted that “decades of government planning for major offshore projects has not yielded a single molecule of gas production and only a tiny amount of oil output.” ·  Feb. 12, 2010 – In March of last year two consortia led respectively by Repsol and Chevron bid for participation in a joint-venture with state oil company Petroleos de Venezeula (PDV) on the Carabobo heavy oil project. The Chevron-led consortium won Project 3, while the Repsol-led consortium won the bid for Project 1. The US embassy in Caracas decribed the details of the consortia and their plans for each project in great detail. Not surprisingly, the Chevron executives in Venezuela appear to have a close relationship with the Caracas embassy, giving it quite privileged information. Whereas the Oil Daily report at the time referenced (sceptically) a government initial production target of 2012, Chevron's Latin America Business Unit President Wes Lohec told the embassy that “he doubted whether PDVSA would achieve any new petroleum production from any of the various heavy oil projects it has initiated with national oil companies before 2014.” Lohec also described the strategic thinking behind the Chevron bid: “Chevron believes "it has a strong hand to play to get to where we need to be," said Lohec, a decision that other companies could not make...Lohec underlined that the GBRV needs Chevron's expertise because it "is headed down a path that is disastrous for them."  In the end, the Venezuelans need to produce oil to generate revenue.  Finally, Lohec noted that new projects in Iraq likely played into BP and Shell's calculus not to bid in Venezuela.  Since Chevron does not have any projects in Iraq and is "already big in Venezuela," it decided to continue forward here.  Separately, Lohec told Petroleum AttachC) that BP and Shell might decide to shut down operations in Venezuela - that it all depends on whether limited operations here are profitable or not and how long a timeline they are working with, noting that Shell usually works with a 20-year timeframe.” ·  Feb. 24, 2010 – Lohec’s assessment contrasted with that of BP’s then-President for Venezuela and Colombia Joe Perez (who has since been transferred to Alaska), and Statoil Venezuela President Anders Hatteland and Vice President for Business Development Arnfinn Jenset. All discussed the Venezuelan situation in confidence: “The lack of infrastructure development in the area of the Faja heavy oil belt projected for development under the Carabobo bid round projects as well as PDVSA's failure to clarify the bidding terms and conditions contributed to BP and Statoil decisions not to submit bids for one of projects.  Statoil remains committed to securing a long-term project in the Junin region of the Orinoco heavy oil belt; its heavy oil upgrader has been out of service since late 2009.  BP believes Petromonagas and other oil fields may eventually be shut-in because of the current electricity crisis.  Both companies report that PDVSA CVP (the PDVSA division that manages all mixed company enterprises) has become more willing to discuss the mixed company model with its private sector partners and has asked for procurement assistance from its international oil company (IOC) partners.” The IOC executives were also quite forthright about the production challenges faced by Venezuela: “Perez explained that PDVSA CVP's new attitude towards its minority partners included requests for procurement assistance.  He gave as an example the lack of drill pipe availability in Venezuela.  Rather than work through PDVSA's procurement division, PDVSA CVP asked BP to procure this basic industry input through its international supply chain... Perez provided several examples of the on-going challenges confronted in the Venezuelan petroleum industry.  He noted that PDVSA recently had removed gas compressor units from the PDVSA-BP mixed company-operated Boqueron oil field for use elsewhere in Eastern Venezuela, thus limiting the amount of natural gas that could be reinjected into the oil field.  In October 2009, a BP proposal to install a 100 MW electricity generating plant, a  $150 million investment, to service Petromonagas' Jose upgrader and its related oil fields was rejected by the PDVSA members of the Petromonagas board of directors. [NOTE: Venezuela is in the midst of an electricity crisis and many of its oil fields rely on the national electricity grid.  See reftels.  END NOTE]  The PDVSA board members told BP that some oil fields would be shut-in as a result of the electricity crisis and thus, the timing of this proposal did not make sense.  [NOTE: As a result of OPEC quota reductions, the Petromonagas project was shut-in for the first half of 2009.  See reftel.  END NOTE]  More generally, Perez observed that with a 16% natural declination rate in the Faja, PDVSA required a permanent drilling program just to maintain production levels.  He indicated that in the Petromonagas field, in a prime location in the Faja, that would equate to completing 18 new wells per year while Petrocedeno (a PDVSA mixed company with Statoil and Total), would require 80 new wells per year.  Perez avoided speculating on how much crude oil Venezuela might produce at the end of 2010.  He noted however, that current Faja productions costs, from well bore to tanker, amount to $4/barrel, suggesting that PDVSA's problems are a result of mismanagement and not a lack of oil revenues.”
POSTED BY Phil Chaffee AT 14:45:00, 0 COMMENTS	SHARE COMMENT
LABELS: CHILE,_ASIA-PACIFIC,TATNEFT
Shell in Iran
26 JANUARY 2011
A series of dispatches from the US embassy in the Hague demonstrate a persistent effort from 2006 to 2009 to encourage Shell to abandon its Iranian oil and gas investments. As it pushed back development target dates on the Iranian projects in which it was involved, Shell gradually developed a key argument for the US embassy, namely that if European companies withdraw from the Iranian oil and gas sector, Chinese companies will immediately take their place: ·  Dec. 21, 2006 – “The Dutch government supports targeted sanctions against Iran but not actions that limit Shell's activities there. Shell does not plan a final Yadavaran investment decision until 2008 and will keep State abreast. The government continues to follow negotiations between Gazprom and Shell over Sakhalin II, Shell's big natural gas project.” Shell's head of international government relations John Crocker “expressed concern about USG efforts to discourage investment in Iran's energy sector. In the short run, he said, the volume of oil produced in Iran will remain unchanged, whether or not Shell participates in Iran oil projects. This is because phase I oil extraction -- a period that normally lasts 10 years -- is not tricky, and the Iranians and Chinese have the requisite technology to proceed on their own. It is from the second phase onward, Crocker added, where the exclusion of foreign oil companies will have an impact. Since this is beyond 2020, it might make life difficult for ordinary Iranians at a time when the political environment hopefully may be more friendly toward the west, Crocker said.” ·  Feb. 9, 2007 – “Shell CEO van der Veer confirmed to the Ambassador on February 7 that no deal was expected on the South Pars LNG project until 2008 at the earliest. Van der Veer said his recent public comments on political concerns related to the project were not well received in Teheran. Meanwhile, GONL officials reiterated support for targeted sanctions against Iran but remained non-committal about any action against Shell or any public comments on investment projects in Iran at this juncture.” ·  May 16, 2007 – “A Shell official confirmed the company does not expect to make any final investment decisions before mid-2008 or early 2009 on the Persian LNG and Yadavaran gas and oil investment projects in Iran. Dutch Foreign Ministry officials noted surprise with the Iranian announcement of a faster timetable for a deal with the Chinese oil firm Sinopec on Yadavaran.” ·  Jan. 2, 2009 – “The Dutch government agrees that doing business with Iran poses risks for Dutch companies, and it will continue to discourage new investments there. Shell has again pushed back its investment decision on the Persian LNG project, this time until late 2010. However, Shell's go-slow approach in Iran belies seething frustration at the perceived ineffectiveness of sanctions against Iran. The company sees Iran's nuclear activities continuing while Chinese and other firms seal long-term energy deals in Iran at the expense of Western energy security interests.” Simon Smits, Director of Economic Cooperation at the Foreign Ministry “reiterated what he had told us before: although Shell maintains a footprint in Iran, the company cares immensely about its reputation and has therefore backed off its Iranian ventures. He added that Shell would never want to jeopardize its huge investments in the U.S. by violating the Iran Sanctions Act, which factors into all its decisions on Iran.” ·  Dec. 2, 2009 - John Crocker, Shell's Head of International Government Relations, “reiterated Shell's long-standing position on Iran sanctions. The firm is not opposed to a broad set of sanctions imposed on all energy sector participants, including Chinese and Russian firms. But if only western energy companies adhere to them, Chinese firms will enthusiastically fill the void. (Note: As in prior meetings - see ref B - he said Iran's downstream oil and gas sector was crawling with Chinese. End note.)” To a certain extent Crocker’s predictions have panned out. Energy Intelligence Finance wrote in September that "the effectiveness of these sanctions continues to be blunted by China, which has allowed its large state oil companies such as China National Petroleum Corp (CNPC) and Sinopec to sign multibillion dollar upstream oil and gas deals with the Iranians.” Meanwhile US efforts to dissuade investment in the Iranian oil and gas sector continue unabated. In today's International Oil Daily, Paul Sampson and Paul Merolli report on a new Congressional push to target Iranian crude oil exports.
POSTED BY Phil Chaffee AT 15:30:00, 0 COMMENTS	SHARE COMMENT
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US Countering Iranian Proliferation Efforts
26 JANUARY 2011
Cables from 2008 and 2009 reveal the lengths the US went through to counter Iranian efforts to purchase materials for its centrifuge program. More interestingly, they also show an intense desire to rope in Beijing as a partner in counter-Iranian efforts. ·  Aug. 1, 2008 – This memo from Washington to the Beijing embassy laid out these US goals: “We are providing information about certain Chinese companies that have provided commodities to Iranian entities involved in its nuclear program in an effort to encourage China to ensure such activities are not continued and to encourage China to adopt a similar proactive strategy of working with their companies to make them aware of potential Iranian procurement in support of its nuclear program.” ·  Aug. 6, 2008 – The Beijing embassy moved quickly, reporting from a meeting with MFA Arms Control and Disarmament Department Nuclear Division Director Zhang Shen, who “praised past “fruitful cooperation” between the United States and China in nonproliferation efforts, and said China will continue to “implement strongly the relevant UN Security Council Resolutions” regarding Iran. Zhang cited past efforts to educate local governments and companies about restrictions on selling sensitive commodities to Iran, but admitted that “some companies are still not aware” of these restrictions.” ·  Sep. 17, 2008 – This memo from Washington details the steps to be taken by embassies across the globe the counter Iranian procurement of critical components for the (slightly) more advanced IR-2 centrifuges. ·  Jan. 14, 2009 – Here Washington gives its Beijing embassy the details of one particular transaction for maraging steel (a critical component for the centrifuge program) that it intercepted.    ·  Apr. 29, 2009 – This memo from the Vienna embassy details a meeting of experts from the P5+1 (the five permanent members of the UNSC plus Germany) on the Iran issue. They also met with Olli Heinonen, then the head of safeguards at the IAEA. I wrote a more comprehensive analysis of the content of these memos yesterday for the Jan. 24 issue of Nuclear Intelligence Weekly.
POSTED BY Phil Chaffee AT 15:25:00, 0 COMMENTS	SHARE COMMENT
LABELS: COSMO,INA (CROATIA),SYRIAN PETROLEUM
Algerian Discontent
26 JANUARY 2011
The fall of Tunisian President Zine el-Abidine Ben Ali earlier this month took many by surprise: Tunisia had long been seen as one of the more stable countries in North Africa. But now that Ben Ali is exiled in Saudi Arabia, many are reassessing the relative stability of Tunisia’s neighbors. One of the most vulnerable regimes appears to be that of appears to President Abdelaziz Bouteflika in Algeria. In last week’s Energy Compass, Jill Junnola wrote that “Algeria, in particular, is at a critical juncture, already crippled by regular protests and corruption scandals. Riots in early January across the country -- sparked by rising food prices after the government cracked down on black-market trade -- were larger and broader in scale than the October 1988 protests that prompted multiparty elections in 1990.”   The fragility of the Bouteflika regime was the key message of two US embassy memos from December 2007 and April 2009: · Dec.19, 2007 – “Recent discussions with former government officials, long-term opposition leaders and journalists paint a picture of an Algerian regime that is fragile in ways it has not been before, plagued by a lack of vision, unprecedented levels of corruption and rumblings of division within the military rank and file.  Our Algerian contacts are often a grumpy lot, but we now hear more than the ordinary amount of concern about the GOA's inability or unwillingness to address political, economic and security problems.  The December 11 suicide bombings in Algiers, carried out by two men amnestied under the Charter for Peace and National Reconciliation, have ignited heated debate about the ability of President Bouteflika's reconciliation program to protect the country.  The debate pits proponents of an urgent and aggressive approach to the terrorist threat against those aligned with Bouteflika who still believe that amnesty has a role to play.  The picture of an isolated president, a stagnant reform process and an uncertain approach towards terror comes at a time when efforts within the government to engineer a third term for Bouteflika are gathering steam.  We do not sense an explosion coming right away.  Instead, we see a government drifting and groping for a way forward. “Sadi [Opposition leader Said Sadi] told us of at least one conversation he has had recently with General Toufik Mediene, the head of Algeria's DRS (military intelligence apparatus) who is widely viewed as the key figure in ensuring regime control and survival.  He said Mediene acknowledged that all was not well with the health of Bouteflika and Algeria writ large.  However, according to Sadi, Mediene said that he needed some kind of reassurance that any political alternative "would be viable" and, by implication, would not destabilize the country.  Sadi said that many senior officers were beginning to wonder if they could get the army out of politics altogether, without fear of public retribution for past abuses during the civil war.” “With oil prices at record highs, former Finance and Prime Minister Benbitour told Ambassador in November, there was less incentive for the regime to carry out much-needed reforms.  High oil prices are bringing incredible wealth into the country, Benbitour told us, but ordinary people are not seeing any impact on their daily lives.  (Indeed, Benbitour publicly coined a term we see often in the media now:  Algeria is rich, but the people are poor.  Islamist leader Djaballah used it with us often on December 17.)  Corruption, XXXXXXXXXXXX, has reached epic proportions, even within the military.  He cited Lieutenant General Ahmad Gaid Salah, commander of Algerian military forces, as perhaps the most corrupt official in the military apparatus, something other contacts have told us as well. When Sadi mentioned the corruption problem to General Mediene, Sadi said, Mediene acknowledged the problem. Motioning silently to the portrait of Bouteflika that hung over their heads, he indicated to Sadi that the extent of the problem went all the way to the top.  (Comment:  many embassy contacts think President Bouteflika himself is not particularly corrupt, but they readily finger the President's brothers, Said and Abdallah, as being particularly rapacious.  The Algerian military, meanwhile, has launched an anti-corruption program that is ambitious by Algerian standards but has left the senior leadership relatively untouched.  End Comment.)” “Sadi, a medical doctor, said that both Bouteflika and Algeria itself were in critical condition and fading.  According to Sadi (who may or may not know), Bouteflika suffers from terminal stomach cancer, and the regime lies on the operating table, slipping towards a point of no return as "untrained surgeons" stand by. Meanwhile, the government's seeming inability to jump-start the stagnant economy has Algerians, especially youth, feeling gloomy and grim about the fate of their country as it drifts into the new year.” ·Apr. 13, 2009 – “To the surprise of noone, Algerian President Abdelaziz Bouteflika was elected to a third term on April 9 in a carefully choreographed and heavily controlled election with official results the main opposition leader called "Brezhnevian." ... A joint statement by observer teams from the African Union, Arab League and Organization of the Islamic Conference was quick to proclaim the election "fair and transparent," but UN monitors declined to participate in the statement despite Algerian government pressure to do so. Their concerns, to be presented in a private report to UN Secretary General Ban Ki-Moon, illustrate a system in which opposition parties and civil society have their backs against the wall and citizens have little to do with a political process increasingly detached from society. With Bouteflika's hold on power secure, Algeria now faces an urgent need for dialogue between the population and the state, a situation that left the UN monitors deeply worried about what comes next. “[W]hile Bouteflika based his third-term platform on continuity, we have heard hints that he is unhappy with the status quo and acknowledges a political system sagging under its own weight. With civil society and opposition now on the ropes, Bouteflika's control over the system appears secure, albeit with no discernible vision for a progressive political future. Without unveiling such a vision through dialogue between citizens, civil society, opposition parties and government, the fate of the disillusioned 72 percent of Algeria's population under the age of 30 remains in doubt, and with it, the long-term stability of the country. As the UN's Mbaye put it, Algeria is "sitting on a volcano." We will continue to sift for opportunities to support reform, and should be prepared to offer our frank but private opinion of Algeria's progress along the way.”
POSTED BY Phil Chaffee AT 15:15:00, 0 COMMENTS	SHARE COMMENT
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The Politics of PetroCaribe
26 JANUARY 2011
Jul.8, 2008 – As the outgoing US ambassador bid farewell to Álvaro Colom, the Guatemalan president defended his decision to sign a PetroCaribe deal with Caracas. [PetroCaribe is a Venezuelan program that allows Carribean and Central American countries to import Venezuelan crude under preferential financing terms.]  He said he was surprised that the Guatemalan countryside had not yet "exploded" in protest at recent increases in fuel and food prices, and expressed concern that a popular backlash might not be long in coming. Food and fuel inflation was straining people's budgets, resulting in increased pressure on the state's limited social welfare net. Colom added that Congress was unlikely to approve his proposed tax reform plan, so expected increases in state revenues would not be realized. PetroCaribe offered attractive financing terms, and would free up considerable funds for social welfare programs. Just a month ago, PetroCaribe negotiations had ground to halt, Colom said, but changing economic conditions had required the GOG to reconsider. Colom said he had discussed PetroCaribe with Dominican President Fernandez, who had encouraged Guatemala's adhesion. Foreign Minister Rodas added that the decision to join PetroCaribe was strictly economic. The GOV had pressed the GOG to join the Venezuelan-led ALBA anti-American trade block, but the GOG wanted no part of it, and would not accede to any Venezuelan political conditions. "We're Social Democrats, but we're not fanatics, and we're aware that radicalism in governance leads to failure," Colom said... President Colom took this opportunity to reiterate the high priority he places on good relations with the United States, and was concerned about the USG's potential reaction to the PetroCaribe deal. With year-on-year inflation now at 13.5%, and inflation of the basic basket of consumer goods at 22%, Colom has reason to be concerned by the potential for popular backlash against rising prices. Though the US embassy in Guatemala City appeared relatively sanguine about Guatemala signing onto PetroCaribe deal, Energy Compass wrote in 2008 that there could be geopolitical implications to signing onto the program: Chavez does not hide his desire to use oil as a political tool: "We have begun to create a new geopolitics of oil that is not at the service of big money interests," he declared at the Cienfuegos summit. This type of pressure explains why some countries have not signed up to Petrocaribe, says one analyst. A time will come "when Chavez will cash in his goodwill in the form of political support," he adds.
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France’s Changing Africa Policy, Part III
26 JANUARY 2011
Sep.9, 2009 - In saying that he would "reform" France's Africa policy, Sarkozy has taken on a task of formidable proportions, which is no less than to break once and for all from the colonial and post-colonial world and its mindset and to bring relations into today's era. To do so, he must overcome inertia and a certain level of comfort on both sides that have accumulated over many years. Yet, as in other areas of French policy, he seems determined to move forward and has taken his first steps. In our view, this is a positive development, for France-Afrique was becoming an increasingly creaky, costly, and potentially dangerous vehicle for dealing with a continent rife with challenges, less amenable to heeding its former colonial masters, and inescapably engaged in global issues of all kinds, from terrorism, to the environment, to drug trafficking, to energy resource management, and well beyond.
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Djibouti’s Energy Challenge
26 JANUARY 2011
Jun.9, 2009 - Djibouti continues to struggle with a widening gap between electricity demand from consumers, and a constrained supply of expensive, diesel-generated electricity provided by the national electricity company.  Realizing that improved supplies of lower-cost energy are imperative to maintain economic momentum and meet the basic needs of ordinary Djiboutians, the GODJ has partnered with a variety of bilateral and corporate partners (including at least one U.S. company) to begin developing Djibouti's considerable renewable energy resources.  Senior GODJ energy officials recently expressed optimism about Djibouti's future potential as an energy producer, but some frustration about possible financing gaps and bilateral misunderstandings impacting the largest renewable project currently on tap: a planned 50-100 megawatt Djibouti-Iceland geothermal plant at Lac Assal. Now that Djibouti has several energy projects on the horizon, Secretary-General Ainan told REO, the next major challenge will be developing an effective regulatory framework to respond to Djibouti's new, diversified energy environment.  Minister Odowa said that now, oil and gas companies interested in Djibouti's offshore and onshore potential were "pushing" the GODJ to allow exploration.  Before negotiating with such companies, he said, the GODJ would like to have much better baseline data on Djibouti's realistic potential, and eventually, assistance in negotiation. Without proper baseline data, Odowa said that the GODJ feared that it would not be able to negotiate fair deals, and asked whether the USG might be able to fund assistance for such data studies.
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Vietnam’s Leadership
26 JANUARY 2011
Sep.10, 2009 - Preparations are already underway for major  leadership changes in Vietnam as the Communist Party gears up for  its Eleventh Party Congress in January 2011. As many as six of the  Politburo’s fifteen members are expected to retire, including the  General Secretary, State President, and National Assembly Chair.  Conventional wisdom identifies CPV Standing Secretary Truong Tan  Sang and Prime Minister Nguyen Tan Dung as the frontrunners to  replace Nong Duc Manh as General Secretary. If Dung does not  become General Secretary, odds are he will remain as Prime  Minister. Politburo members since 1996, Dung and Sang have amassed  unparalleled influence in Vietnam’s Party-state apparatus; they are  arguably the two most powerful political figures in the country  today. The problem is that, though rivals, Dung and Sang are also  too alike for comfort -- both are Southerners, both former HCMC  Party Secretaries. Vietnam’s enduring regionalism argues that one,  likely Sang, will be frustrated in 2011. If Dung keeps his seat as  PM, the two strongest contenders for General Secretary are current  National Assembly Chair Nguyen Phu Trong and -- more radically --  the Politburo’s newest member, the conservative head of the CPV  Ideology and Education Commission, To Huy Rua.   Neither PM Dung nor Standing Secretary Sang is a  champion of political reform in the manner of the late PM Vo Van  Kiet. But they are known commodities: pragmatic, market-oriented,  and in favor of steady, incremental advances in Vietnam’s  relationship with the United States. Trong has adopted a similar  approach as NA Chair. Rua may be a different story altogether.  His elevation to the Politburo both reflects and reinforces a  hard-line trend that has been increasingly evident since the  crackdown on journalists reporting on the PMU-18 corruption scandal  almost exactly one year ago. What role he plays in Vietnam’s  leadership transition will say much about whether political  liberalization -- on hold for now -- will resume after 2011 or will  remain stifled.
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Brazilian Biofuels
26 JANUARY 2011
In a series of memos from 2006 to 2009, US diplomats worked hard to understand Brazil’s biofuels industry, and to help shape its international reach. They met early with Dilma Roussef, who as Lula’s chief aide managed the government’s biofuels policies. They also dealt with the geopolitical implications of the biofuels market, potential trade issues between the US and Brazil (primarily over ethanol tariffs), and grim labor conditions in Brazil’s sugar industry. Mar.31, 2006 – Sao Paolo consulate reports on a Congressional visit to Maringa and Sao Paolo led by Senator Charles Grassley (IA) - Chairman of the Senate Finance Committee. The delegation visited a sugar mill, ethanol plant and automobile factory, and discussed ethanol and FlexFuel-engine automobiles. General Motors do Brasil (GMB) has over thirty years of experience with ethanol as an automobile fuel. During the 1970s oil crisis, the GoB began to regulate gasoline usage. By 1986, ethanol-burning cars accounted for 90 percent of Brazilian automobile production. But in 1988-89, sugar prices rose sharply, and ethanol was no longer a cost-competitive fuel. As a result, thousands of Brazilian consumers who had purchased ethanol cars lost their investments and Brazilians generally lost confidence in alternative fuel technologies. It wasn't until 1992 that GMB began to run its first FlexFuel studies. Brazilian consumers felt burned by their experience with ethanol engines in the 1980s. GMB, however, still believed in ethanol technology and sought to develop an engine that could serve as a hedge against fuel price fluctuations. FlexFuel engines were developed with this goal in mind, with flexible fuel usage, meaning that the engines can run on gasoline, ethanol, or any combination of the two fuels. The FlexFuel engine system has a fuel sensor that continually monitors the mix of ethanol and gasoline in the tank and instructs the engine to alter performance based on the fuel mix. Despite FlexFuel's success, the technology is not without its challenges. One concern is low fuel quality. Another concern is the recent increase in the price of ethanol over the first few months of 2006. The break-even point for choosing ethanol over gasoline is 70 percent. This means that as long as the price of ethanol is 70 percent of the price of gasoline at the pump or less, it is more economical for consumers to fill-up with ethanol. If the price of ethanol exceeds 70 percent of that of gasoline, then gasoline is the better choice. Brazil's successful ethanol fuel model has generated great interest in the United States and throughout the world. FlexFuel technology appears to have solved the problem of gasoline price fluctuations. The main constraints to even greater internal use and exports are problems in expanding the supply of ethanol quickly enough. Apr.20, 2006 – Brasilia embassy asks for interagency input on potential US-Brazil biofuels ties. Apr.24, 2006 – Brasilia embassy reports on general state of the Brazilian biofuel industry: As countries worldwide search for alternatives to increasingly expensive petroleum, not to mention green fuel alternatives that help meet Kyoto Protocol targets, Brazil finds itself in an enviable position. The world's largest producer of both ethanol and sugar is the purveyor of technology, infrastructure and processes that could help fuel a biofuel revolution. Yet, despite the monumental success of ethanol in Brazil, it is not happening without some growing pains. Jun.2, 2006 - Paulo Rogerio Goncalves, Director of International Relations for Brazil's Ministry of Science and Technology, meets with the Brasilia embassy about possible cooperation in biofuels: Goncalves said that Brazil does not want to be in the position of trying to supply the world with ethanol, if it tried the country would become one large sugar cane plantation and would not be able to feed its own people. In addition, Brazil would always be open to the risk of a virus destroying much of their yield, although it had tried to minimize that risk by developed nearly 100 difo work with their U.S. counterparts to possibly develop a fuel that would serve the consumption needs of both countries, and perhaps the world. Aug.24, 2006 – US Ambassador in Brasilia has first meeting with Dilma Roussef, whose position then equated to Presidential Chief of Staff for policy, and who was also a former minister of mines and en ferent strains of sugar cane (some better for fuel, others better for consumption). Brazilian scientists would like tergy, chairperson of Petrobras' board, and who had overall responsibility in the GOB for interagency coordination on bio-fuels: This initial meeting between Ambassador and Rousseff was warm, positively-charged and substantively dense. We have in Rousseff, we believe, an enthusiastic and highly influential senior GOB interlocutor on these key issues, and we intend to cultivate our relationship with her. If Lula wins re-election, we think it likely she will continue in her current post, and in the event of a Lula victory in October, it would be highly productive to arrange a visit soon thereafter to Washington for Rousseff for top-level consultations. Sep.13, 2006 – In a meeting between US officials and Alessandro Teixeira, President of the Brazilian Agency for Industrial Development, the two sides disagreed on how global ethanol markets should be shaped. Greg Manuel of the Department of State noted that the USG and Brazil are the Western Hemispheres gorillas and, therefore, natural allies to build up the hemisphere; Brazil through cane, the U.S. through cellulosic processes. Manuel then laid out the USG's target countries in the region, explaining the rationale of splitting up the targets regionally to circumvent an over-reliance on one country or region and thereby decreasing the chances for failure. Teixeira asserted that any conversation about the commoditization of Ethanol should take into account India and China. He explained that Brazil wants to be an international player and, therefore, would be more likely to choose high-profile countries with a degree of international impact. He declared that many of the countries the U.S. presented are important from a social but not from an economic perspective. Oct.24, 2006 – Sao Paolo consulate reports on ambassador’s visit: During his October 4-10 visit to Sao Paulo, Ambassador Sobel met with the new country president of Archer Daniels Midland (ADM), who advised that prospects for new infrastructure investment in Brazil are poor and that the company does not plan to produce ethanol outside the U.S. The Ambassador also met with Rubens Mello, CEO of Brazil's largest sugar company, and toured a sugar/ethanol mill. Mello advocated for the lifting of the U.S. import levy on Brazilian ethanol exports. He expressed some doubts about the prospects for developing biofuels industries in third countries. Mar.1, 2007 - In his February 6 meeting in Sao Paulo with senior Brazilian energy experts, Under Secretary R. Nicholas Burns emphasized the tremendous potential of U.S.-Brazilian cooperation on ethanol, and solicited his interlocutors' views on developing this partnership. Discussion centered on the foreign policy and market-building potential of this cooperation. William Lee Burnquist, agronomist at the Cane Technology Center, stressed ethanol's enormous potential for foreign policy. Development of an alternative fuel source could help counter-balance Venezuela's influence, for example, in the Caribbean. Post-Castro Cuba could become an important producer. Brazil could build on President Lula's "south-south" initiative by expanding to Africa, Asia, and other parts of the developing world. Jun.2, 2008 – Sao Paolo consulate reports on ethanol sector: Soaring petroleum prices and a rapidly growing domestic fleet of flex-fuel cars are driving double-digit expansion in ethanol production in Brazil. In the coming year alone, Brazil's production of sugarcane-based ethanol is projected to increase 14.8 percent. The ethanol private sector in Brazil is increasingly partnering with international companies in building production facilities, both in and out of Brazil, as well as addressing the internal logistics problems that undermine the potential profitability of Brazilian ethanol exports. Infrastructure bottlenecks in Brazil, as well as various international tariff regimes, will likely continue to pose hurdles to the expansion of Brazilian ethanol exports and the internationalization of ethanol as a commodity. Jul.30, 2008 – Rio consulate: This week, Brazil's semi-public oil company Petrobras will launch a new subsidiary to run its growing biofuels operations, looking towards building production capacity to meet growing global demand for ethanol exports. The new subsidiary, called Petrobras Biocombustivel, will coordinate Petrobras' significant biofuels investments (US$1.5 billion over five years) which are currently run by various units of the company. Through joint ventures with foreign investors, Petrobras plans to buy minority stakes in ethanol mills in Brazil and abroad, with an eye towards markets such as Venezuela, Japan and the U.S. Aug.4, 2008 – Sao Paolo consulate speculates whether Brazil will pursue a WTO case against US tariffs on Brazilian ethanol imports. Aug.8, 2008 – Sao Paolo consulate: Brazil's high profile, high-tech ethanol industry has fallen under an international spotlight for alleged use of forced or slave labor to harvest sugarcane. Oct.7, 2008 – Brasilia embassy brief for US Commerce Secretary Carlos Gutierrez prior to his visit: Building on the success of our bilateral MOU on biofuels, we believe it is critical that we expand and deepen U.S.-Brazil energy relations as Brazil looks to become a global energy player. During his visit here August 4-7, Energy Acting Deputy Secretary Kupfer engaged in some very productive conversations with GOB officials seeking to identify potential areas of cooperation. He heard from the various departments of the Ministry of Mines and Energy (MME) a laundry list of things we might do together, including cooperating on reinvigorating our respective civil nuclear programs, alternative energy sources such as solar and wind, clean coal, interconnectivity, energy efficiency, and shale exploration, as well as oil exploration. The discovery of potentially massive offshore reserves of oil and gas estimated to contain between 30-80 billion barrels of oil equivalent could put Brazil within the top ten oil countries by reserves. Though the possibilities have generated a great deal of excitement, industry observers caution that the technological challenges involved with ultra-deepwater drilling are extensive, including a worldwide shortage of equipment such as drilling rigs, meaning that developments will probably be slow in coming. Petrobras appears to be overextended internationally and is hamstrung by limited equipment resources. However, it has launched a multi-billion dollar procurement initiative and is reexamining its international priorities so that it can focus on domestic opportunities. U.S. oil companies are poised and ready in many cases to take on more exploration opportunities - a message that we do not believe industry has adequately conveyed to the GOB. Feb.11, 2009 – Sao Paolo consulate: The effects of the global financial crisis are visible within Brazil's sugar and ethanol sector with industry experts estimating that about 20 percent of Brazil's ethanol mills are suffering financial difficulty. Even though the fundamentals for the sector remain positive, and sugar prices and internal demand for ethanol should fortify the sector this year, the outlook for 2009 is mixed. Some ethanol producers have good cashflow, others are saddled with debt, and many lack viable financing. Although some consolidation is inevitable, experts do not foresee a major increase in market dominance by individual companies. The biggest impact from the crisis going forward will be postponement of new projects; however, this is temporary as demand for ethanol continues to grow. Internationally, countries that had planned to develop ethanol industries could review or suspend them given the scarcity of financing as well as the lower price of gasoline. Over the long-term, Brazilian producers still anticipate that international markets (including the U.S.), in addition to high internal demand, will increase demand for Brazilian ethanol. Aug.24, 2009 – Brasilia embassy reports on agreement to improve labor conditions in Brazil’s sugar industry.
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