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

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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