HYPERDYNAMICS DEFENDS GUINEA DEAL

UNCLAS CONAKRY 000902 SIPDIS SIPDIS SENSITIVE E.O. 12598: N/A TAGS: ECIN EFIN ECON EMIN GV SUBJECT: HYPERDYNAMICS DEFENDS GUINEA DEAL ¶1. (SBU) SUMMARY. Contrary to recent press reports, the Director General of Ecobank says that the accounts of U.S. oil company Hyperdynamics have not/not been frozen. The company is responding to this and other negative publicity by publishing information on the terms and scope of the existing contract as well as positive reporting on the overall economic benefits of the contract for Guinea. END SUMMARY ¶2. (SBU) On August 7, Econoff met with Mr. Assiongbon Ekue, Director General of Ecobank, in response to recent press reports alleging that Ecobank froze the accounts of U.S. Oil Company Hyperdyamics due to allegations of frad and misrepresentation. Ekue said the rumors ar false - Hyperdynamics' accounts have not/not ben frozen by the bank. ¶3. (SBU) Some press repots, which may/may be sourced to rivals for Guine's potential oil and gas holdings, have also contined to attack Hyperdynamics' contract with Guinea calling it unfair and an example of exploitatio of Guinea by multinational corporations, and deanding renegotiation. Parallel to this rhetoric, hich has been evident for some months, the new cosensus government ordered earlier this spring anexamination of all existing mining and oil contrcts. Currently, the Ministry of Mines is reportedly preparing a list of seven 'unfair' terms - to be provided septel - in the Hyperdynamics contract for review by the National Assembly when it resumes consideration of the contract for ratification. ¶4. (SBU) Hyperdynamics is accommodating the GoG's request to 'review' the contract. In addition, the company is fighting negative publicity by publishing reports of the beneficial effects of the contract on the Guinean economy. On August 7, Hyperdynamics published an open letter emphasizing that the company's contractual share of the proceeds is still subject to taxation by Guinea. ¶5. (SBU) The tax scheme means that if Hyperdynamics produces, for example, 2000 barrels per day, the company receives only 37.5% of total revenues, after tax, as opposed to the 75% specified in the contract. Furthermore, Hyperdynamics clarified that its contract covers less than half of Guinea's off-shore area. Of the 80,000 square kilometers of Guinea's off-shore area, the Hyperdynamics concession covers only 30,000 square kilometers. (Note: What Hyperdynamics did not emphasize in this letter, although it has done so in previous public statements, is its position that its agreement with Guinea must be ratified by the National assembly before it will actually relinquish all claim to the remainder of Guinea's offshore. End Note). KAEUPER