CHAD GEARING UP FOR OIL CONVENTION NEGOTIATIONS

UNCLAS NDJAMENA 001316

SIPDIS

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 EPET CD
SUBJECT: CHAD GEARING UP FOR OIL CONVENTION NEGOTIATIONS



1. (SBU) SUMMARY: The GOC is continuing to develop its
gameplan for the country's upcoming negotiations with the oil
consortium, according to Chad's petroleum minister. The
Government believes that the country should have a greater
stake in Chad's petroleum production, and will insist on
greater participation in the production and sale of the
country's oil. The Minister has already traveled to Algeria
to look at the country's oil sector, and will travel to other
African oil-producing countries in the coming weeks to
explore the possibility of technical assistance for Chad's
new national oil company. END SUMMARY.

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PREPARING FOR NEGOTIATIONS
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2. (SBU) In November 7, Chadian Minister of Petroleum
Emmanuel Nadingar told the Ambassador that the GOC is still
in the preparatory stages of its plans to renegotiate the
country's oil convention with the consortium. Chadian
technical experts were compiling the necessary information to
present the GOC case for renegotiation, and the benefit of
altering the Convention to allow the GOC to have a share in
the oil production process. Nadingar also said that the
technical experts were working hard to identify specific
areas of the convention that required a review and
reevaluation, so as to clarify commercial arrangements
between the GOC and the oil consortium. According to the
Petroleum Minister, this issue was one of many that needed a
formal review in the context of the Convention negotiations.


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CHAD SHOULD HELP PRODUCE ITS OWN OIL
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3. (SBU) Nadingar stated that the GOC still felt that Chad
should have a stake in the production and sale of the
country's oil. The current convention, he argued, did not
offer the Chadian people the maximum level of benefits it
could receive from the country's oil. He added that poverty
alleviation could only take place if Chad had a production
sharing arrangement that meant a long-term receipt of
petroleum revenues. The Ambassador noted that the current
arrangement between Chad and the oil consortium, in which
Chad received 12.5 percent of revenues in the form of royalty
payments and 60 percent income tax payments, was a good deal
for the Chadians. The Minister responded by saying the tax
arrangement was only beneficial for Chad in a high price
environment. He said that the GOC was seeking an arrangement
that did not make Chad's benefits conditional on a higher
than average price of oil per barrel. The Ambassador
expressed hope that discussions on the terms of the
convention could be pursued cooperatively without recourse to
the confrontational tactics the GOC had used in its recent
dealings with the consortium.
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TECHNICAL ASSISTANCE FOR A NATIONAL OIL COMPANY
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4. (SBU) Nadingar also said the GOC was actively consulting
with African neighbors who had already developed national oil
companies. Nadingar hiself had traveled to Algeria to meet
the countrys oil minister, and toured the country's refinery
and training institute. He noted that he informaly
discussed the possibility of Algerian assistane for the
development of Chad's national oil comany. Nadignar said
that he had also traveled toCameroon to meet with officials
from Cameroon's ational oil company, Socit Nationale des
Hydrocarbures, and would arrange to go to Congo-Brazzaville
in the near future.
WALL