STATOIL'S OPTIMISM FADES

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000112



SIPDIS



SIPDIS



ENERGY FOR CDAY, DPUMPHREY, AND ALOCKWOOD

NSC FOR DTOMLINSON



E.O. 12958: DECL: 01/12/2017

TAGS: EPET, ENRG, EINV, ECON, VE

SUBJECT: STATOIL'S OPTIMISM FADES





Classified By: Economic Counselor Andrew N. Bowen for Reason 1.4 (D)



1. (C) SUMMARY: Energy (MEP) Vice Minister Bernard Mommer

realizes that the BRV needs the private sector to run the

strategic associations but his influence in the Chavez

administration is waning, according to Statoil. Statoil is

not worried about changes in the regulatory or fiscal

framework for the gas sector since it believes the BRV will

have its hands full with the oil sector. PDVSA relies

heavily on Sarda, an Iranian service company. Statoil will

not invest a single additional kroner or dollar in Venezuela

until there is a clear legal framework. END SUMMARY



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STRATEGIC ASSOCIATIONS

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2. (C) Petroleum Attache (Petatt) met with Statoil Venezuela

President Thore Kristiansen on January 18 to discuss BRV

plans for the oil and gas sectors. Kristiansen stated he had

just come from a four and one half hour meeting with MEP Vice

Minister Bernard Mommer. Although Kristiansen was fairly

tight-lipped about the meeting, he said he firmly believed

that Mommer realizes the BRV needs the private sector to run

the strategic associations. Kristiansen rattled off a series

of statistics on the amount of investment needed to run

Sincor, as well as the number of employees and contractors

needed to keep it in operation, to prove his point. He

stated that a significant portion of the meeting with Mommer

covered corporate governance and management structure issues.

However, Kristiansen stated twice during the meeting that he

believed Mommer's influence within the BRV is waning.



3. (C) When Petatt mentioned press reports quoting MEP

Minister Ramirez' comments that PDVSA would take a 60 percent

stake in the associations, Kristiansen indicated that he was

not sure that we should believe the reports. Although he did

not specifically say it, he appeared to believe that the BRV

was willing to negotiate on the size of PDVSA's stake, based

on discussions with BRV officials. Kristiansen later added

that senior BRV and PDVSA officials do not really understand

the oil and gas policies that they are supposed to be

implementing. (COMMENT: Kristiansen is not the only oil

executive who is getting mixed signals from senior BRV and

PDVSA officials. Chevron Latin America President Ali Moshiri

told Petatt on January 15 that he had received e-mails from

senior officials that indicated they wanted to negotiate with

Chevron. It is clear that at this point even senior

officials within the MEP and PDVSA have no idea what the

BRV's policy is regarding the migration of the strategic

associations to PDVSA controlled joint ventures. END COMMENT)



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GAS SECTOR

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4. (C) Given vague statements by President Chavez that the

BRV would overhaul the legal and fiscal framework for the gas

sector, Petatt assumed that Kristiansen would be concerned

about Statoil's substantial gas investment in Venezuela.

However, when Petatt raised the subject, Kristiansen said he

was not worried. He stated he believed the BRV would not

make any changes in the gas sector until it had finished

migrating the strategic associations, the exploratory round

fields, and the Sinovensa joint venture to PDVSA controlled

joint ventures. Given the lack of qualified personnel in MEP

and PDVSA, Kristiansen believed that the migration of all of

these entities would be a long, drawn-out process. (COMMENT:

Although Kristiansen's position is perfectly reasonable, he

did not offer any evidence to back up his views. We suspect

he arrived at his position after meeting with Mommer. Since

oil is far more important politically and economically than



CARACAS 00000112 002 OF 002





gas for the BRV, it stands to reason that it would focus its

limited resources on migrating all of the various oil

projects before it tackled gas sector reforms. END COMMENT)



5. (C) Kristiansen noted Statoil would fulfill its

exploration commitments in Venezuela. Since this is a

long-term commitment, Statoil would have plenty of time to

evaluate the Venezuelan investment climate before it actually

had to invest significant amounts to begin production. In

addition, Kristiansen noted another company would reach the

point where it would have to decide on making significant

investments in production long before Statoil. He implied

that evaluation, when it occurred, would give Statoil the

opportunity to sit back and see how the BRV treated its

colleague. (NOTE: We believe Kristiansen was referring to

Chevron. END NOTE) Kristiansen said Statoil would not

invest another kroner or dollar in Venezuela until there is a

clear investment framework.



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SARDA

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6. (C) After questioning Petatt about Iranian influence in

Venezuela, Kristiansen noted that Sarda, an Iranian service

company, is a key PDVSA contractor. He said Statoil is

forced to use Sarda's services for its Iranian operations.

In Kristiansen's opinion, Sarda is one of the most

incompetent service companies in the world and said he could

not understand why PDVSA would use their services.



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THE BLOOM IS OFF THE ROSE

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7. (C) COMMENT: In the past, Kristiansen has been very

optimistic about expanding Statoil's operations in Venezuela.

He has stated directly and indirectly that Statoil was

willing to accept just about any negotiated agreement that

would allow it to increase crude production in Venezuela.

All that has changed. During the meeting, Kristiansen

repeatedly used the term "communist" to describe BRV policy

and peppered Petatt with questions about the Embassy's views

on Chavez. He was particularly interested in our views on

how far Chavez was going to go with economic reforms. At one

point, he stated it was clear educated Venezuelans would not

have much of a future if they stayed in Venezuela.



8. (C) Kristiansen, an urbane man who looks like he just

stepped out of a Brooks Brothers catalogue, was animated

during the meeting. At the conclusion of the meeting, he

thanked Petatt for maintaining contact with Statoil. We have

noted during the past two months that private sector

petroleum contacts have been more forthcoming with us. We

suspect the change in attitude stems from the constant demand

for analysis by worried home offices as well as a need to

vent. Petroleum contacts are under tremendous pressure to

provide their headquarters with analysis on the present

situation. Reporting that they are in contact with the

Embassy assuages nervous bosses back in corporate

headquarters. In addition, some contacts clearly approach

meetings with us as if they were going to a counseling

session or visiting a priest. END COMMENT.



BROWNFIELD