Identifier
Created
Classification
Origin
08ASTANA2083
2008-10-20 12:12:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:  

KAZAKHSTAN: EXXON-MOBIL PROVIDES UPDATE ON

Tags:  PGOV EPET EINV KZ 
pdf how-to read a cable
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UNCLAS ASTANA 002083 

SENSITIVE
SIPDIS

STATE FOR SCA/CEN,EEB/ESC
STATE PLEASE PASS TO USTDA DAN STEIN

E.O. 12958: N/A
TAGS: PGOV EPET EINV KZ
SUBJECT: KAZAKHSTAN: EXXON-MOBIL PROVIDES UPDATE ON
KASHAGAN NEGOTIATIONS

UNCLAS ASTANA 002083

SENSITIVE
SIPDIS

STATE FOR SCA/CEN,EEB/ESC
STATE PLEASE PASS TO USTDA DAN STEIN

E.O. 12958: N/A
TAGS: PGOV EPET EINV KZ
SUBJECT: KAZAKHSTAN: EXXON-MOBIL PROVIDES UPDATE ON
KASHAGAN NEGOTIATIONS


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) The Ambassador met on October 20 with Steve Rose,
General Manager for ExxonMobil Kazakhstan and a direct
participant in the ongoing negotiations to amend the Kashagan
agreement. Rose said that the Kashagan partners
(KazMunaiGas, Eni, ExxonMobil, Shell, Total, Inpex, and
ConocoPhillips) have reached agreement on the issue that was
thought to be holding up the negotiations: oil
transportation and export. Each company has now agreed to
take individual responsibility for the lift, marketing, and
sale of its own production share, rather than pooling
transportation resources or using a joint transportation
company. Rose confirmed that Total and KazMunaiGas (KMG)
have insisted on their right to sell Kashagan crude to Iran,
although he said it was too soon to say how much. He noted
that ExxonMobil's legal team had reviewed existing U.S.
legislation and sanctions against Iran and determined that
this arrangement would not violate U.S. law.


3. (SBU) Rose flagged two additional issues, not mentioned
by Maksat Idenov -- KMG First Vice President and the
Kazakhstani government's lead negotiator on Kashagan --
during Idenov's October 6 meeting with Ambassador Mann (see
septel),that remain to be resolved before the Kashagan
agreement can be finalized: (1) reimbursement to the
consortium for $125-230 million in import customs duties,
value added taxes, and penalties and fines that were paid,
unnecessarily in ExxonMobil's view, by Kashagan
subcontractors; and (2) the terms and conditions for a $1.78
billion loan to KMG to cover its purchase of an additional
8.4 percent stake in Kashagan. According to Rose, the
Western partners are willing to sell the shares to KMG at
LIBOR plus 3 percent, but "we will insist on maintaining the
flow and control of this money. Their pledge must be rock
solid."


4. (SBU) Rose described Maksat Idenov as a "straight-shooter,
very smart and savvy, with international experience as a
Chevron Vice President in the Middle East." Rose noted that
Idenov strongly prefers to negotiate directly with senior
vice presidents from the major international oil companies.
He told the Ambassador that Idenov complained in a letter to
the companies' CEOs when executives from ExxonMobil, Shell,
and Total had to leave Astana earlier this month, after a
two-week stay. Rose said that all three executives are
expected back in Astana on October 20 and will resume
negotiations the following day.


5. (SBU) According to Rose, Idenov scheduled a meeting on
October 20 with Prime Minister Masimov, Minister of Energy
Mynbayev, Justice Minister Baliyeva, Supreme Court justices,
and government prosecutors to discuss options for resolving
the latest impasses. Rose said that following his meeting
with the Ambassador, he would be immediately returning to the
negotiations, which the Kazakhstani government has said must
be concluded by October 25.
HOAGLAND