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IdentifierCreatedClassificationOrigin
07VIENNA2890 2007-12-04 08:10:00 CONFIDENTIAL Embassy Vienna
Cable title:  

OMV DEFENDS OIL CONTRACTS WITH THE KRG

Tags:   ENRG EPET EINV ECON IZ AU 
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VZCZCXRO2848
OO RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHVI #2890 3380810
ZNY CCCCC ZZH
O 040810Z DEC 07
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9101
INFO RUCNRAQ/IRAQ COLLECTIVE IMMEDIATE
RUEHGB/AMEMBASSY BAGHDAD IMMEDIATE 0149
					  C O N F I D E N T I A L VIENNA 002890 

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/04/2017
TAGS: ENRG EPET EINV ECON IZ AU
SUBJECT: OMV DEFENDS OIL CONTRACTS WITH THE KRG

REF: A) BAGHDAD 3893 B) VIENNA 701 C) 06 VIENNA 3486

Classified By: Acting Economic-Political Counselor Phillip R. Nelson
for reasons 1.4 (b) and (d).

Summary
-------



1. (C) During a November 30 meeting with Emboffs, OMV's Vice
President for Business Development, Peter Seitinger, defended
OMV's recent signing of two production sharing agreements
(PSAs) with the Kurdish Regional Government (KRG). Seitinger
argued that the PSAs were entirely in line with the Iraqi
constitution and draft Hydrocarbon Law. Seitinger lamented
that the draft Hydrocarbon Law was languishing in Baghdad due
to a power struggle between the Federal Oil Minister and the
KRG Natural Resources Minister. Seitinger said that OMV was
also interested in developing Iraq's underutilized natural
gas sector, which could eventually provide 5-10 billion cubic
meters for the Nabucco gas pipeline project by 2015.
EconUnit Chief cautioned OMV that the USG could not support
OMV's deals with the KRG, absent the passage of a national
Hydrocarbon Law. End Summary.


OMV: Contracts Compatible with Iraqi Constitution


--------------------------



--------------------------





2. (C) Emboffs met on November 30 with Peter Seitinger, Vice
President of Business Development for OMV Exploration and
Production, to discuss OMV's recent contract with the Kurdish
Regional Government (KRG) to acquire two oil exploration
blocks in northern Iraq. Seitinger confirmed that OMV had
signed two production sharing agreements (PSAs) with the KRG
to develop the Mala Omar and Shorish blocks. The PSAs cover
a three-year period, allowing for seismic operations and
drilling. OMV has an option to convert the PSAs into
production licenses.



3. (C) OMV, according to Seitinger, would receive 15% of
production revenues, with "Iraqi authorities" receiving 85%.
Seitinger said that it is his understanding that the KRG is
willing to share revenues with the Iraqi central government
on a 17%/83% basis, as Iraq's draft Revenue Sharing Law
stipulates. Seitinger conceded that passage of the Revenue
Sharing Law was intertwined with the stalled draft
Hydrocarbon Law.



4. (C) Seitinger said he was aware of criticism from Baghdad
that the KRG had negotiated away too many concessions to
western oil companies. However, Seitinger defended OMV's
decision to bypass the central government, maintaining that
the PSAs were entirely in line with the Iraqi Constitution
and the draft Hydrocarbon Law. The constitution, according
to OMV legal opinion, grants regional governments the
authority to award exploration licenses. In Seitinger's
view, delay in passage of the Hydrocarbon Law was due solely
to a personal power struggle between Federal Oil Minister
Shahristani and KRG Natural Resources Minister Ashti Hawrami.



5. (C) Seitinger maintained that OMV had kept the Federal
Oil Ministry in the loop regarding its negotiations with the
KRG. Seitinger characterized comments from Oil Minister
Shahristani threatening to annul the KRG-OMV contracts as
unhelpful. (Note: Seitinger made no reference to
Shahristani's letter to OMV CEO Wolfgang Ruttenstorfer
announcing the annulment of the OMV-KRG PSA (ref A). End
Note).



6. (C) EconUnit Chief cautioned Seitinger that the USG could
not condone OMV's deal with the KRG, absent a national
Hydrocarbon Law. Revenues from Iraq's immense natural
resources should be an important source of development for
all Iraqis.


OMV Eyes Iraqi Gas For Nabucco


--------------------------





7. (C) According to Seitinger, OMV remains interested in gas
exploration in northern Iraq (refs A and B). Seitinger
opined that OMV could offer its expertise in the natural gas
business to help Iraq develop its underutilized gas sector.
Seitinger said that a large portion of any future gas
production would undoubtedly go for the region's demand.
However, Seitinger said that OMV hoped to be able to access
between 5-10 billion cubic meters of Iraqi gas for the
Nabucco gas pipeline project by 2015.
Kilner