UPDATE ON THE PETROLEUM SECTOR IN THE SOUTH

C O N F I D E N T I A L SECTION 01 OF 02 KHARTOUM 001621 SIPDIS SIPDIS E.O. 12958: DECL: 07/09/2016 TAGS: EPET PGOV ECON EINV PREL SU SUBJECT: UPDATE ON THE PETROLEUM SECTOR IN THE SOUTH REF: KHARTOUM 01188 Classified By: CGJ R. Whitehead, Reason: Section 1.4 (b) and (d) ¶1. (C) Summary: Total has offered a fallback position on Superbloc B in Southern Sudan that would give the Government of Southern Sudan (GoSS) an equal cut with the Government of National Unity (GoNU). Total continues to insist that it will not buy out the interests of White Nile, Ltd. (WNL), which has been absent from Juba for the past weeks. The ad hoc committee of four ministers charged with presenting the GoSS Council of Ministers with recommendations on how to handle the Total/WNL imbroglio has still not released a report. On another front, there is internal maneuvering in the GoSS by those who wish to replace GoNU State Minister of Energy Angela Teny and other GoSS members of the National Petroleum Commission (NPC). End summary. -------------- Total Offers a Fallback Position -------------- ¶2. (C) A local representative of the Total-led consortium seeking to launch operations in Superbloc B described the latest developments in Total,s attempt to wrest control of the bloc from WNL. On June 6, senior Total officials met in Khartoum with GoNU Petroleum Minister Al Jaz, who reportedly admitted that the GoNU would be unable to use the its habitual strong-arm tactics that had paved the way for past oil exploration operations in the northern rim of Southern Sudan. Al Jaz said that any GoNU attempt to use force to open Bloc B risked in a muscular SPLA response. ¶3. (C) Al Jaz subsequently met in Khartoum with GoSS Vice President Riek Machar, and the two reportedly agreed that both sides needed to find a solution to the impasse. Total responded by offering to lower the consortium,s equity ownership by ten percent and offering this to the GoSS Nilepet parastatal, thus matching the ten percent already guaranteed to the GoNU Sudapet parastatal. Total made it clear that it would not buy out WNL and remained unwilling to include them in a joint venture. The Total official told CG that Total did not know how its consortium partners would react to a reduced equity share. ¶4. (C) WNL has been noticeably absent from Juba for the last three weeks. The renovated WNL office sits empty and only partially furnished, and Managing Director Phil Ward and his associates have not been in town. The Total official speculated that Ward had either retreated to the WNL offices in Nairobi or was working at the site near Bor. Total,s greatest concern is the possibility of a secret deal between WNL and Ascom, a Moldovan company that has opened a large site on the east side of the Nile from Juba and taken over the old Total site south of Bor. Total has received credible reports that Ascom trucks have ferried equipment, including possibly drilling equipment, to the WNL exploration site near Padak. -------------- GoSS Yet to Take the Hard Decision on Bloc B -------------- ¶5. (C) GoSS Minister of Parliamentary Affairs Gabriel Changson Chang confirmed that the report from an ad hoc four-person ministerial committee containing recommendations for resolving the controversy has not yet seen the light of day, several months after the original deadline. Consequently, the scheduled debate and decision by the Council of Ministers has not taken place. At this point, the only GoSS decision appears to be not to decide. -------------- A Proposed Realignment of Players -------------- ¶6. (C) Behind the scenes, there are internal GoSS maneuverings that could change this equation. GoSS Minister of Legal Affairs Makwei told CG that he had informed Salva Kiir that GoNU State Minister for Energy Angelina Teny should be replaced on the still dysfunctional National Petroleum Commission (NPC) on the grounds that the CPA stipulates that the NPC will share equal representation between the GoSS and the GoNU, not between the Sudan People,s Liberation Movement and the National Congress Party. Mawkwei argued that Teny, as a member of the GoNU and a MP in the National Assembly, is not qualified to represent the GoSS and is thus ineligible to sit on the NPC. ¶7. (C) Makwei claimed that he was the de facto replacement of former NPC member Nhial Deng Nhial, who resigned his GoSS positions and left for the United Kingdom recently. Makwei said that he had urged Salva Kiir to replace other members of KHARTOUM 00001621 002 OF 002 the NPC as well, since the logical GoSS NPC membership should include the Ministers of Legal Affairs, Finance, and Mines and Energy. He observed that Kiir had not yet acted on this proposal. ¶8. (C) Such realignment would weaken the influence of Machar, who has the support of NPC member John Luc Jok as well as Teny, who is Machar,s wife. Should Makwei,s proposal prevail, the Total position might be marginally improved. Makwei has been aggressive toward Total because of close historic French and Total corporate ties to Khartoum; nonetheless, Total believes that Makwei is as honest a broker as can be found. Total thinks that Makwei, unlike other involved parties, has no vested personal interest in the success of the WNL venture. HUME