ESSO'S CONCERNS ON CHAD SECURITY, CONVENTION

UNCLAS NDJAMENA 001348 SIPDIS SENSITIVE SIPDIS DEPT FOR AF, EB, INR/A, ENERGY FOR CAROLYN GAY AND GEORGE PEARSON, TREASURY FOR OTA, LONDON AND PARIS FOR AFRICA WATCHERS, DAKAR FOR FCS E.O. 12958: N/A TAGS: ASEC EFIN ENRG PGOV EPET CD SUBJECT: ESSO'S CONCERNS ON CHAD SECURITY, CONVENTION NEGOTIATIONS ¶1. (SBU) SUMMARY: The Esso-led oil consortium has formally notified the GOC that it will not re-negotiate its existing convention with the Government, but will consider new agreements that would allow the GOC to have a role in the country's oil production at new sites. While the government has not formally responded. Esso believes that the issue may be put off until 2007. Esso and other members of the oil consortium recognize that the oil fields in southern Chad are of strategic interest to any group seeking to overthrow the regime. Surveillance has been increased at the fields. END SUMMARY. - - - - - - - - - - - - - - - - - - - - - - ESSO'S SECURITY CONCERNS FOR THE OIL FIELDS - - - - - - - - - - - - - - - - - - - - - - ¶2. (SBU) During a meeting with the Ambassador on November 17, Esso country manager Ron Royal raised the company's concerns that the Doba oil fields may be a target for Chadian rebels wanting to destabilize the regime. He noted that the consortium partners had expressed concern about the security of the pipeline following clashes between the GOC and Chadian rebel groups in late October, and the GOC's decision to declare a state of emergency for several areas of the country. The well-known fact that the consortium would be making a large income tax payment in March 2007 was presumably a factor in rebel strategy. ¶3. (SBU) Currently, according to Royal, the security level of the Doba oil fields had been raised from a baseline level to an elevated level of "blue," which meant that Esso security officials would enhance surveillance of the oil fields. He added that the rest of the country, which included N'Djamena, was at an "orange" level, which meant that travel was restricted and personnel numbers were reduced to essential staff. Royal recognized that if a group wished to disrupt Chadian oil production, an attack on the block valves of the pipeline, located at pumping stations in Cameroon, would be the most effective way immediately impact the flow of oil coming out of Chad. While disruptive, the damage would be temporary, and could be fixed in a matter of weeks. - - - - - - - - - - - - - - - - - - - - - - - CONSORTIUM SAYS NO TO CONVENTION NEGOTIATIONS - - - - - - - - - - - - - - - - - - - - - - - ¶4. (SBU) Royal also said that the consortium had formally informed the GOC that it would not renegotiate its existing convention with the Government. Royal called the letter short of "hell no", but still "very strong." In a letter sent to the Minister of Petroleum earlier in the week, Royal said that the consortium asserted that the existing convention was Chadian law and had been the basis for the consortium's investment decision. Furthermore, amendments had already been made to the convention to maximize the GOC's economic benefits in a high-price oil environment. The consortium also told the GOC that they would work with the National Commission (established to examine renegotiation) to explain the merits of the current agreement. Royal had already approached Encana, the other major international oil company in Chad, to ensure that the oil industry in Chad was aligned on its commitment to existing agreements with the GOC. According to Royal, Encana's views were very similar to Esso's. ¶5. (SBU) Royal pointed out that the GOC had yet to officially respond to the consortium's letter. However, during discussions with the country's national petroleum coordinator, Haroun Kabadi, Royal received the impression that the GOC would not tackle the issue until the beginning of next year, and that the Government might be willing to negotiate a face-saving measure with the consortium. Royal said that other consortium members had agreed to the possibility of negotiating new agreements with the GOC in areas with oil production potential that would allow the GOC to have a share in the production process. WALL