Mozambique - Anadarko Petroleum Signs $300 Million

UNCLAS MAPUTO 001625 SIPDIS SIPDIS SENSITIVE AF/S FOR HTREGER MCC FOR SGAULL USAID FOR AFR/SA E.O. 12958: N/A TAGS: EPET ETRD EINV ECON MZ SUBJECT: Mozambique - Anadarko Petroleum Signs $300 Million Oil and Gas Contract Ref: Maputo 326 Sensitive But Unclassified - Business Confidential ¶1. (U) On December 20 U.S. oil company Anadarko Petroleum and the government of Mozambique signed an exploration and production agreement for one offshore (mostly) block in the Rovuma basin, in northern Mozambique (see reftel for details of the block). Under the agreement, Anadarko will shoot seismic and drill seven wells. The incoming president of Anadarko Mozambique, John Peffer, briefed econ/pol section chief on December 19 on the particulars. ¶2. (SBU) Contract negotiations took longer this summer and fall than Anadarko expected, according Peffer. He told emboff that the Mozambicans were being counseled by a Norwegian petroleum expert (Norway provides much of the funding for Mozambique's National Institute of Petroleum (INP)),who pushed a far more "socialist" or "community service" agenda than Anadarko was accustomed to. (Note: Norway's oil giant Norsk Hydro has concession rights to another block in the Rovuma basin, and earlier this year finalized its contract with the GRM. End note.) Further, the Mozambicans wanted iron-clad guarantees that Anadarko's USD 300 million expenditure would be forthcoming, having been burned in the past, according to Peffer, by other prospective outside investors. In the end, to satisfy the Mozambicans, Anadarko was forced to take out insurance on its commitment costing the company USD 3 million per year. ¶3. (SBU) Along with shooting seismic, Anadarko will drill seven wells - several of them in water deeper than 1,000 meters. The deepwater wells will cost approximately USD 50 million each, shallower ones less. Anadarko has committed to drill more wells than any of the other four companies with rights to the other six blocks in the Rovuma basin - Artumas, a small Canadian firm, will drill three only and the other companies (Norsk Hydro, ENI and Petronas) need only shoot seismic - since its concession is the most promising of the lot. ¶4. (U) Peffer said that Anadarko would use most of next year completing its environmental impact assessment, which the Mozambican government requires. Seismic shooting will occur in 2008 and well drilling in 2009. ¶5. (U) Also on December 20, the Italian company ENI signed an agreement with the GRM for its block in the Rovuma basin. Dudley