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Identifier
Created
Classification
Origin
06ALMATY2156
2006-06-19 11:39:00
CONFIDENTIAL//NOFORN
US Office Almaty
Cable title:  

KAZAKHSTAN: EXXONMOBIL EXECS DISCUSS CPC, KASHAGAN

Tags:   ENRG  EPET  KZ  PGOV  PREL  RU 
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VZCZCXRO3310
PP RUEHDBU
DE RUEHTA #2156 1701139
ZNY CCCCC ZZH
P 191139Z JUN 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC PRIORITY 5812
INFO RUEHAK/AMEMBASSY ANKARA 1901
RUEHKB/AMEMBASSY BAKU 0697
RUEHBJ/AMEMBASSY BEIJING 1269
RUEHDBU/AMEMBASSY DUSHANBE 1787
RUEHKV/AMEMBASSY KIEV 2465
RUEHMO/AMEMBASSY MOSCOW 1268
RUEHNT/AMEMBASSY TASHKENT 7592
RUEHSI/AMEMBASSY TBILISI 2216
RUEAIIA/CIA WASHDC
RUEBAAA/DEPT OF ENERGY WASHDC
						C O N F I D E N T I A L ALMATY 002156 

SIPDIS

NOFORN
SIPDIS

DEPT FOR EB/ESC; SCA/PO (MANN); SCA/CEN (MUDGE)

E.O. 12958: DECL: 06/19/2015
TAGS: ENRG EPET KZ PGOV PREL RU
SUBJECT: KAZAKHSTAN: EXXONMOBIL EXECS DISCUSS CPC, KASHAGAN

REF: ALMATY 1085

Classified By: Amb. John Ordway, reasons 1.5(b) and (d).



1. (C) Summary: ExxonMobil executives briefed the Ambassador
on the company's Kazakhstani interests on June 8. Country
Manager David Willis told the Ambassador that the apparent
Putin-Nazarbayev political breakthrough on the issue of
Caspian Pipeline Consortium (CPC) expansion in April had not
translated to the working level, where the removal of Deputy
Energy Minister Oleg Gordeyev as Russia's lead negotiator had
left the process without clear direction. On Kashagan,
project parters are continuing their push to strip operator
AGIP of much of its management control. Finally, ExxonMobil
is hoping to follow Chevron's lead by selling its (two)
Kazakhstan service stations, thus closing an unprofitable
business line originally opened at President Nazarbayev's
request. End Summary.

CPC Expansion Process Languishing


--------------------------





2. (U) Willis, accompanied by the President of ExxonMobil's
Development Company, Mark Albers, and the company's current
and incoming Government Relations Managers, Yelda Guven and
Patty Graham, met with the Ambassador on June 8 in Almaty.



3. (C) Regarding CPC expansion negotiations, Willis told
Ambassador that, although Putin and Nazarbayev's public
announcement in April of a breakthrough in CPC negotiations
might lead one to believe that the political impediments to a
deal had been removed, no formula for agreement had been
communicated to the working level. The GOK, he said, was
quite frustrated with Russia. ExxonMobil had seen a copy of
an MOU signed by Gordeyev and Kazakhstani Lead Negotiator
Kairgeldy Kabyldin in May. Since then, however, the Russians
had disavowed the agreement, fired Gordeyev, and reportedly
even launched an investigation into his activities. In his
absence, Willis said, "there is no one at the tactical level
to deal with," and the process was languishing.

Kashagan: Wresting More Control from AGIP


--------------------------





4. (C) Albers told Almbassador that, following the recent
discovery of a significant design flaw in the Kashagan
project (reftel), project partners had united in their demand
to replace many AGIP appointees, including the Project
Director, with their own secondees. Operator AGIP, Albers
explained, had responded to their Fall 2005 request by asking
for a twelve-month transition. "Even the presidency of the
country doesn't require a year-long transition," Albers said
incredulously. The partners would send another letter soon,
he said, but might not overcome AGIP's "stalling and
filibuster" techniques until the GOK became more assertive on
the issue. That might happen in the coming weeks, he
concluded, once the GOK learned more about the costs
associated with the latest delay.

Hoping to Exit the Retail Fuels Business


--------------------------





5. (C) Willis commented that ExxonMobil was hoping to follow
Chevron's August 2005 lead by selling its two remaining
in-country service stations to KazMunaiGaz (KMG). More than
a decade ago, Willis explained, President Nazarbayev had
encouraged TOTAL to establish service stations in Kazakhstan,
and other companies had followed suit in order not to
prejudice their chances for offshore oil tenders. Now,
Willis said, ExxonMobil hoped to exit the low-margin business
line, while underscoring to the GOK that the move in no way
signified a reduced ExxonMobil interest in other current or
future investments. (Note: Chevron successfully sold its
service stations to KMG subsidiary Trade House KMG, which in
November 2005 announced its ambition to increase the number
of country-wide KMG service stations from 55 to 500 by 2010.
At the time, the move was justified as a means of reducing
alleged "profiteering" at the gas pump associated with the
late Summer 2005 spike in oil prices. End note.)
ORDWAY