Identifier
Created
Classification
Origin
06ASTANA
2006-10-19 06:43:00
CONFIDENTIAL//NOFORN
Embassy Astana
Cable title:  

KAZAKHSTAN: EXXONMOBIL UPDATES AMBASSADOR ON CPC

Tags:  ENRG EPET KZ PGOV PREL 
pdf how-to read a cable
VZCZCXRO7344
PP RUEHDBU
DE RUEHTA #0204/02 2920643
ZNY CCCCC ZZH
P 190643Z OCT 06 ZDK(TAO)
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 7333
INFO RUCNCIS/CIS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEBAAA/DEPT OF ENERGY WASHDC
C O N F I D E N T I A L SECTION 02 OF 02 ASTANA 00

SIPDIS
0204

NOFORN
SIPDIS

DEPT FOR EB/ESC; SCA/CEN (O'MARA)

E.O. 12958: DECL: 10/18/2015
TAGS: ENRG EPET KZ PGOV PREL
SUBJECT: KAZAKHSTAN: EXXONMOBIL UPDATES AMBASSADOR ON CPC
PIPELINE, KCTS PROJECT


***********************
* Missing Section 001 *
***********************


ASTANA 00000000 002 OF 002


CPC Negotiations: New Governance Proposal on Table
-------------- --------------


5. (C) Willis informed the Ambassador that a recent, new
proposal on CPC corporate governance held some promise for
unblocking the long-stalled expansion negotiations (Ref B).
The proposal would arrange voting rights to ensure that the
GOR did not have the ability to change the structure of the
venture over the objections of the non-governmental
shareholders. However, he said, before moving forward
ExxonMobil needed assurances that the proposal had high-level
Russian backing, and was not merely the creation of the
working level team. If ExxonMobil received a signal however,
that high-level Russian decision-makers backed the
compromise, the company would "engage and go forward," with
the remaining economic issues unlikely to present a serious
obstacle to agreement.


6. (C) Willis assured the Ambassador that, on the issue of
governance, at least, the major CPC partners were in sync.
Willis explained that, of all the CPC partners, British
Petroleum (BP -- with only a 2.5% share) was most ready to
give in to Russia's demands, because BP was seeking to sell
its share of both CPC and TengizChevroil (5%, held as a joint
venture with Lukoil) and wanted a CPC deal in order to
enhance the value of its holdings.

ExxonMobil Not Interested in Bosphorus Bypass
--------------


7. (C) Continuing the conversation about CPC expansion
negotiations, Willis told the Ambassador that ExxonMobil
had no interest in participating in any Bosphorus bypass
project, including Burgos-Alexandropolis. "We just can't see
the economics," he said, suggesting that any company which
joined the project would pay an additional $1 per barrel of
oil to ship crude to the Black sea, while those which did not
sign up would "just sail through the Bosphorus, waving." The
Ambassador suggested that $1 per barrel seemed like a very
reasonable "insurance premium" against the possibility that
an accident or terrorist act might close the Bosphorus.
Willis disagreed, replying that ExxonMobil "doesn't assess
the risk as that great."


8. (C) Comment: We find it interesting that ExxonMobil is
preparing to assert itself in KCTS negotiations -- both
within the HGA process and, potentially, by leading
negotiations between the Kazakhstan-based producers and the
BTC Co. -- after playing only a passive role in the
recently-completed BTC IGA negotiations. ExxonMobil, at
least, seems to have seized on the future Eskene-Kuryk
pipeline as a lower-cost way to ship second generation Tengiz
production to market than the railroad-based route currently
being negotiated and constructed (Ref C). Whether the HGA
negotiations proceed rapidly enough to make KCTS a
cost-saving alternative for Tengiz may depend on whether KMG
-- as a Tengiz partner -- buys into ExxonMobil's (and,
presumably, Chevron's) vision, and whether the Tengiz parties
can impose their sense of urgency on other negotiating
parties more habituated to the (receding) deadline of
Kashagan's first production. End Comment.
ORDWAY