POTENTIAL NEW REVENUE-SHARING AGREEMENT BETWEEN

S E C R E T RIYADH 002793

SIPDIS

NOFORN
SIPDIS

DHAHRAN SENDS
PARIS FOR ZEYA, LONDON FOR TSOU
ENERGY DEPARTMENT FOR GEORGE PERSON AND JAMES HART

E.O. 12958: DECL: 04/16/2016
TAGS: EPET ENRG EFIN PGOV SA
SUBJECT: POTENTIAL NEW REVENUE-SHARING AGREEMENT BETWEEN
ARAMCO AND THE SAG

REF: A. RIYADH 1177 (NOTAL)

B. 2005 RIYADH 9368

Classified by Acting Consul General Dave Speidel for reasons
1.4 (b) and (d).


1. (C) In a conversation on April 13, two expatriate
analysts at Saudi Aramco told PAO and EconOff that Aramco and
the SAG were in the process of making a significant change to
their revenue-sharing practices. In the past, they
explained, Aramco had reserved from its revenue stream the
amount needed to fund its operations and investments and then
sent the remainder to the SAG. According to the new system,
they said, Aramco would keep 15 percent of its revenues, send
85 percent to the SAG, and seek loans to finance the
difference between its 15 percent and what it needed for
operations and investment. "It's a healthy change," one of
the analysts opined, "because it will make Aramco think
harder about the cost-effectiveness of its investments. It's
also good for the banks, because it will give them an outlet
for their cash." The analysts were uncertain when this new
system would be introduced, but they were confident that it
was close to implementation.


2. (C) Turning to the Abqaiq attack, the analysts took issue
with the claim that the facility's redundancies ruled out the
possibility of lengthy interruptions in production or export
from a terrorist incident. (Note: Saudi Aramco officials
(ref A) and the media made this claim in reference to the
Abqaiq attack, and the Minister of Petroleum, Ali Al-Naimi,
has made it more generally in reference to the Kingdom's oil
infrastructure. End note.) Had the attackers succeeded in
causing a fire at one of the stabilizer columns, they noted,
it would have been extremely difficult to put it out before
it spread to the other columns: "Gas and oil fires are
incredibly difficult to put out. Take the fire at Juaymah (a
gas processing plant near Ras Tanura) in 1987, which burned
for days. At Abaqaiq, you've got oil being pumped in from a
station that's maybe 25 kilometers away. You can't turn off
that flow instantly." One of the analysts also mentioned
that an expatriate colleague in Abqaiq town around the time
of the attack said that a number of the locals seemed to be
"cheering the attack on," perverse as that may seem given the
town's economic dependence on the facility.


3. (C) Switching gears, the other analyst mentioned that the
Saudi Ministry of Petroleum had hosted officials from Iraq's
Ministry of Petroleum in Riyadh and tried to convince them
that there was "no need for the Americans" in rebuilding
Iraq's oil infrastructure. Asked for more details, the
analyst said that Yasser Mufti, who works in Aramco's
Corporate Planning department and is Aramco's representative
to OPEC, had "bragged" in November or December 2004 about a
meeting he had just attended in Riyadh in which he and
Ministry of Petroleum officials had delivered this message to
Iraqi counterparts. The analyst had a cynical interpretation
of the effort Mufti described: "Like it or not, the Saudis
have an interest in keeping Iraq's production down. What
they told the Iraqis was ridiculous - look at how Aramco
started, and how dependent it is even today on American
contractors and technology."


4. (S/NF) Note: The analysts, U.S. citizens whom PolOff and
PAO know socially, have access to technical data, conduct
sophisticated modeling, and interact with senior Aramco
executives. We reported information they previously supplied
in ref B. End note.

(APPROVED: SPEIDEL)
GFOELLER