GOC REFUSES CHEVRON'S RIGHT TO CHAD'S OIL, AND

UNCLAS SECTION 01 OF 02 NDJAMENA 001105

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF, EB, ENERGY FOR CAROLYN GAY AND GEORGE PEARSON,
TREASURY FOR OTA, LONDON AND PARIS FOR AFRICA WATCHERS,
DAKAR FOR FCS REPRESENTATIVE CYNTHIA GRIFFITH GREENE

E.O. 12958: N/A
TAGS: ECON EFIN ENRG PGOV CD
SUBJECT: GOC REFUSES CHEVRON'S RIGHT TO CHAD'S OIL, AND
OTHER NEWS

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1. (SBU) SUMMARY: On August 31, the GOC informed Esso that
Chevron and Petronas were not permitted to produce or lift
the country's crude oil for exportation and sales overseas.
Chevron has alerted the Cameroon Oil Company that it intends
to continue lifting its crude oil. Contrary to Chevron's
expectations, the meeting between Chevron CEO and President
Deby did not take place. The country's Finance Minister
informed us that the GOC plans to move ahead with its
intentions to renegotiate its 1988 and 2004 conventions with
the Consortium. Senator Obama's public comments on the tax
dispute received extensive media coverage. END SUMMARY.

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GOC DENIES CHEVRON'S RIGHT TO COUNTRY'S OIL
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2. (SBU) On August 31, the office of Chadian Prime Minister
Pascal Yaodminadji transmitted a letter to Chevron and
Petronas that stated that the two oil companies no longer
possessed the legal rights to produce or lift Chad's crude
oil for international sales. Chevron's mid-Africa country
manager Carole Rock told the Embassy on September 3 that
Chevron had already sent a letter to the Minister of
Petroleum and Minister of Finance reiterating their position
on the validity of the company's tax filings and the 2000 tax
benefit agreement with the GOC. She also noted that Chevron
had already informed the Cameroon Oil Company (COTCO),which
operated the Cameroonian end of the Chad-Cameroon pipeline,
that the company intend to continue lifting Chadian crude oil
for overseas sales.


3. (SBU) During a conversation with Economic/Consular
Officer on September 4, Esso interim-Public Affairs advisor
Yolla Zongor stated that Esso was trying to determine its
commitments to lift Chadian crude for its consortium
partners. The basic legal issue, according to Zongor, boiled
down to legal obligations to its consortium partners versus
its legal obligations to the Government of Chad. Esso's
legal team was currently trying to determine the direction
the operator would have to take to satisfy it contractual
obligations.

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DEBY-O'REILLY MEETING DOES NOT HAPPEN
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4. (SBU) In Paris, a proposed meeting between Chevron CEO
Dave O'Reilly and President Deby did not take place as
scheduled. We are still trying to determine the reasons for
the cancellation of the meeting. There is no indication, as
of yet, of any attempts to reschedule the meeting.


5. (SBU) At the same time, Rock noted that following
meetings with the World Bank, the company has realized that
the Bank has developed "several negative perceptions" of
Chevron's position with respect to the 2000 tax benefits
agreement, possibly as a result of the Bank's interactions
with the GOC. Rock pointed out that Chevron had already met
with World Bank Senior Advisor Robin Cleveland to begin the
process of clearing up these misperceptions, and would
continue to stress its position to Bank officials.

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MINISTER OF FINANCE ON TAX DISPUTE, NEGOTATING EXISTING
CONVENTIONS
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6. (SBU) On August 31, Minister of Finance Abbs Tolli met
with CDA to discuss the tax dispute etween Chevron and
Petronas. CDA stated that Wahington was concerned by the
GOC's decision, andhoped that Chad adhered to its
contractual obligaions and allowed Chevron to use all legal

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avenues available. She also stated that the U.S. hoped that
both sides could reach an amicable solution.


7. (SBU) Tolli reiterated the GOC's position that the 2000
tax benefit agreement was a confidential agreement that other
members of the Chadian government were not aware of. He
noted that Chad was not able to reap the benefits of the high
price environment as a result of Chevron's and Petronas'
insistence of the merits on an illegal agreement. Tolli also
pointed out that he and National Tax Director Ramadan Moussa
made numerous attempts to establish contact with Chevron and
Petronas to indicate the GOC's position, but Chevron and
Petronas failed to respond to the Minister's message. He
indicated that a resolution between the parties was a
possibility, but Chevron and Petronas needed to meet their
financial obligations to the GOC.


8. (SBU) The Minister added that the GOC was moving forward
with its attempts to renegotiate the 1988 and 2004
conventions with Esso. According to him, the GOC had
highlighted their concerns on the current structure of the
1988 and 2004 oil conventions during the Finance Minister's
meeting with Department of Treasury officials in 2005. Tolli
said that in order for Chad to reap the benefits of the
country's oil production, it would have to be involved in the
Consortium's oil production efforts. The
recently-established national commission, in which the
Minister of Finance was the vice-president, was currently
preparing an action plan to began negotiations with the
consortium. Tolli also stated that the commission may ask
the World Bank or another donor to act as a mediator between
the GOC and Esso. Queried as to the day-to-day implications
of the President' move to expel Chevron and Petronas,
Minister Tolli stated that he expected that oil would be
shipped out as per existing procedures and commitments
(COMMENT: This statement contradicts the contents of the
Prime Minister's letter to Chevron and Petronas of the same
day).

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OBAMA COMMENTS ON TAX DISPUTE
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9. (U) During his trip to Chad, Senator Obama, in response
to media questions following his meeting with President Deby,
asserted that the GOC needed to ensure that it adhered to its
contractual obligations with foreign companies. He also
argued that U.S. investors would be hesitant to invest in
Chad should the Government not adhere to its commitments.
The Senator also stressed the importance of both sides
reaching an amicable solution.
TAMLYN