PORTUGAL TALKS TO VENEZUELA, RUSSIA AND IRAN TO

C O N F I D E N T I A L SECTION 01 OF 02 LISBON 002744

SIPDIS

SIPDIS

STATE FOR EUR/WE KEVIN OPSTRUP; NEA/SCA CHRISTIAN AULBACH;
EEB/ESC/IEC/ENR DANIELLE MONOSSON; EEB/TPP/BTA/EWH JANET
SHANNON

E.O. 12958: DECL: 10/11/2017
TAGS: EPET ENRG ECON TRGY PO
SUBJECT: PORTUGAL TALKS TO VENEZUELA, RUSSIA AND IRAN TO
DIVERSIFY ENERGY SUPPLY

REF: A) LISBON 2730 B) LISBON 1814 C) LISBON 1524

Classified By: Pol/Econ Officer Tiffany McGriff, Reasons 1.4 (b),(d)

SUMMARY
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1. (C) Portugal's energy market is abuzz over Galp Energia's
(Portugal's dominate energy firm) recent activities which
include the signing of an MOU with Petroleos de Venezuela SA
(PdVSA),Gazprom's possible acquisition of a minority stake
in the company, and behind-the-scenes procurement talks with
Iran's national oil company (NIOC). According to Galp
Energia, the company is using the PdVSA MOU and talks with
Iran, among other countries, to help Portugal meet its top
energy goal -- energy supply diversification. Portugal is
heavily dependent on energy imports, with foreign sources
providing between 80-90% of its primary energy needs. In a
conversation with the Ambassador, FM Amado dismissed concerns
that the Galp-Gazprom collaboration would have a negative
impact on Europe's energy security and was skeptical that the
PdVSA MOU with Galp would result in much concrete
cooperation. END SUMMARY

ENERGY OVERVIEW -- NEED FOR DIVERSIFICATION
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2. (U) Portugal is heavily dependent on energy imports, with
foreign sources providing between 80-90% of its primary
energy needs. Seventy-five percent of crude oil and
one-hundred percent of natural gas are imported. Efforts to
alleviate this heavy dependence can be seen throughout
Portugal's National Energy Policy, with its strong focus on
supply diversification. Galp Energia, the formerly
state-owned oil and gas company in which the state retains a
7% stake, dominates the energy market from domestic storage
and transportation to distribution and retail sales.

THE GALP ENERGIA-PdVSA MOU
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3. (C) During Galp Energia's October 2 "Lisbon Energy Forum
2007," Galp Energia and PdVSA signed an MOU that will serve
as a framework for potential joint exploration and production
projects in Venezuela, and for strategic storage of PdVSA
crude in Portugal for direct sale to Portugal and other
European countries. Galp Energia's Director of Investor
Relations Tiago Villas-Boas informed Pol/Econ Officer that as
a result of the MOU, Galp Energia could acquire an 18% stake
in the "Magna Reserva" Orinoco Oil Belt project where there
are ongoing studies to quantify and certify oil reserves, as
well as an undisclosed stake in the Mariscal Sucre natural
gas (NG) exploration project. Villas-Boas also stated that
while these investment opportunities will likely benefit Galp
Energia, Venezuela was the driving force behind the MOU, as
it desperately wants to break into the European oil market.
(NOTE: Venezuelan Petroleum Minister and PdVSA President
Rafael Ramirez Carreno, Iranian Petroleum Ministry Executive
Director Hojatollah Ghanimifard, Gazprom CEO Vitaly Vasiliev,
and Repsol Corporate Director Antonio Calcada da Sa shared a
panel with Galp Energia's President Manuel Ferreira de
Oliveira during the forum. Representatives from Chevron, ENI,
Sonangol and Total participated in a separate panel. Also,
Venezuela and Iranian representatives were given seats of
honor during a forum dinner event. END NOTE)

RUSSIAN EFFORTS TO ACQUIRE AN INDIRECT STAKE
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4. (SBU) Villas-Boas confirmed reports that Russia's Gazprom
is looking to indirectly acquire a minority stake in Galp
Energia from Angola's Sonangol. Sonangol currently owns a 45%
stake in Amorim Energia, which in turn owns 33% of Galp
Energia. In a recent press interview, Sonangol's CEO Manuel
Vicente stated that his company is willing to reduce its
stakes in Galp Energia in order to strengthen connections
with Gazprom and secure joint natural gas exploration and
production in Angola and Russia.

IRANIAN TALKS, BUT NO AGREEMENTS...YET
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5. (C) Villas-Boas dismissed press reports that Galp Energia
is planning to sign a similar MOU with Iran's national oil
company NIOC. However, he acknowledged that the two groups
have talked about the possibility of Galp Energia procuring
crude oil from NIOC, and he could not rule out future
agreements. During the Lisbon Energy Forum, the Iranian
Petroleum Ministry's Executive Director stated that Iran is
interested in entering the European energy market but did not
specify any pending agreements.

LISBON 00002744 002 OF 002



COMMENT
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6. (C) It is ironic that as most of eastern Europe is seeking
to diversify away from Gazprom, Portugal is exploring
diversification opportunities with Gazprom to alleviate its
heavy energy dependence on African and Middle Eastern
suppliers. In a recent conversation with the Ambassador (ref
A),FM Amado dismissed concerns that Galp's cooperation with
Gazprom would have a negative impact on Europe's energy
security and was skeptical that the Galp-PdVSA MOU would
result in much concrete collaboration. Nonetheless, we have
reached out to others in the MFA and Ministry of Economy to
express US concerns. Galp Energia is aware of the conflicts
associated with a potential Iranian agreement, complicated
further by the fact that Amado is a strong supporter of
increasing pressure on Iran because of its nuclear weapons
program. END COMMENT

Hoffman