RESOURCE NATIONALISM IN TUNISIA

C O N F I D E N T I A L SECTION 01 OF 02 TUNIS 001488

SIPDIS

SIPDIS

STATE FOR EEB/ESC/IEC/EPC (GLENN GRIFFIN) AND
NEA/MAG (HARRIS)
STATE PASS USTR (BURKHEAD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON) AND ADVOCACY CTR
(JAMES)
CASABLANCA FOR FCS (ORTIZ)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: DECL: 11/15/2017
TAGS: EPET ENRG EINV PGOV TS
SUBJECT: RESOURCE NATIONALISM IN TUNISIA

REF: A. STATE 150999

B. TUNIS 791

C. TUNIS 453

D. 06 TUNIS 2689

Classified By: Ambassador Robert F. Godec for reasons 1.4 (b) and (d).

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Summary
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1. (C) Although the Government of Tunisia retains strong
control over natural resources, the energy sector remains one
of the largest sources of foreign investment in the country
and the GOT actively encourages foreign investment in the
sector. In 2006, foreign direct investment (FDI) in the
energy sector reached 940 million dinars (US $770 million),a
sum representing approximately 65 percent of Tunisia's total
FDI. In general, written contracts and agreements are
honored by the GOT and there is no history of rules changing
to the detriment of foreign investors. End Summary.

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Oil and Natural Gas
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2. (C) The GOT actively encourages foreign investment in the
energy sector, particularly in oil and natural gas
exploration. In 2006, FDI in the energy sector, largely in
oil and natural gas exploration, reached 940 million dinars
(US $770 million). British Gas remains Tunisia's largest
foreign investor, but American firms such as Pioneer Natural
Resources and ExxonMobil have also invested in Tunisia. Oil
and natural gas exploration are controlled by state-owned
Tunisian National Oil Company (ETAP). ETAP grants permits
for exploration and reserves the right to participate at up
to 50 percent of a project's capital.


3. (C) Domestic oil and gas distribution are under monopoly
control of the government. The GOT maintains a monopoly on
oil refining through state-owned Tunisian Refining Company.
Currently, there is only one refinery in Tunisia, located
near Bizerte. There are plans to build a second refinery in
Skhira with Qatar Petroleum, which was awarded the tender for
the project (Ref B). Domestic oil distribution is controlled
by state-owned National Distribution and Marketing Company
and domestic natural gas distribution is fully controlled by
state-owned Tunisian Company for Electricity and Gas (STEG).
The GOT maintains fixed prices and also subsidizes
petroleum-related products for Tunisian consumers.

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Electricity
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4. (C) Despite strong foreign participation in oil and
natural gas exploration, there has been little foreign
investment in electricity. STEG maintains authority over
electricity projects and has a monopoly on domestic
distribution. There are several co-generation projects with
foreign investors, but distribution is still through STEG.
The GOT maintains an indirect subsidy on electricity, by
subsidizing inputs and maintaining a fixed price. In a
meeting with the Ambassador, Minister of Industry and Energy
Afif Chelbi stated unequivocally that the GOT is not
interested in private wind energy generation because the cost
would be prohibitive (Ref C). Chelbi stated that although
the GOT would be privatizing most state-owned companies,
energy provision would remain public.

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The Outlier: Enerciel
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TUNIS 00001488 002 OF 002



5. (C) The US company UPC Wind Partners and its Tunisian
subsidiary Enerciel have been engaged in a protracted dispute
with STEG over UPC-Enerciel's investments in wind energy (Ref
D). While the Embassy continues to monitor this case and has
intervened on behalf of Enerciel with the GOT, Enerciel has
not been able to fully substantiate its claims with
documentation. We do not believe this case is representative
of the type of resource nationalism outlined in Ref A.
GODEC