AZERBAIJAN: SOCAR PRESIDENT SAYS ANY PUBLICITY BAD

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000242

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/12/2018
TAGS: PGOV PREL AJ ENRG
SUBJECT: AZERBAIJAN: SOCAR PRESIDENT SAYS ANY PUBLICITY BAD
PUBLICITY


Classified By: Ambassador Anne E. Derse, Reasons 1.4 (b,d)


1. (C) SUMMARY. State Oil Company of Azerbaijan (SOCAR)
continues to seek a 'zero publicity' policy in relation to
its efforts to strengthen energy ties with Europe.
Specifically, Socar President Abdullayev asked that USG
officials not refer publicly to the current GOT-GOAJ dispute
over tas transit, as he fears it will serve to harden the GOT
position. Socar and Nabucco Pipeline General Manager
Reinhard Mitschek had good disussions during the latter's
recent visit to Baku. SOCAR continues to oppose expansion of
the BTC pipeline until questions relating to post-2024 (the
'Zero Balance Date' at which the pipeline reverts back to
GOAJ ownership) are answered. SEND SUMMARY.


2. (U) On March 7 Ambassador Derse met with Socar President
Rovnaq Abdullayev to discuss energy developments. Also
present were SOCAR Marketing Vice-President Elshad Nasirov,
Foreign Investment Department Head Vaqif Aliyev, and Energy
Officer.

TURKEY
--------------


3. (C) Abdullayev said that recent press comments by USG
officials to the effect that Turkey and Azerbaijan were
having problems concerning gas transit were not helpful, as
they made it harder for the GOT to back down from its
position on transit. He said that Socar has always sought to
keep its problems, for example with BP, out of the press, and
urged that the USG also avoid focusing publicity on problems
Azerbaijan was having with Turkey on transit. Ambassador
Derse said she would relay these concerns.


4. (C) In response to the Ambassador's question, Abdullayev
said that he hoped the relevant gas supply contracts would be
signed by summer. That very day there would be meetings in
Vienna between EU members and GOT Energy Ministry officials
(COMMENT: The meeting was between BOTAS Nabucco Coordinator
Osman Goksel led the GOT delegation and from the EU it was
Brendan Devlin. OMV also attended but w/o any other Nabucco
consortium members). Abdullayev said the main problem with
any gas supply deal in Turkey was that no one would be
willing to sign, for fear of repercussions.

NABUCCO
--------------


5. (C) SOCAR VP Nasirov said that there were the same
publicity problems with Nabucco as there were with gas
transit through Turkey. He said he had just had had a
four-hour meeting with Nabucco Gas Pipeline Managing Director
Reinhard Mitschek, one hour of which was spent on the need to
avoid any/all publicity about Socar-Nabucco negotiations, to
include the signing of any agreements with Socar and.or the
possibility of Socar becoming a Nabucco partner. However, an
exasperated Nasirov told the Ambassador that as soon as the
Socar meeting was over, Mitschek told press that "one of the
provisions" of the documents he had just signed "stipulates
confidentiality," and as such he couldn't say anything other

SIPDIS
than that the two sides were close to signing.

BTC
--------------


6. (C) Abdullayev said that SOCAR didn't support the
expansion of BTC from one to 1.2 million barrels a day, due
to the financial losses that it would entail for the GOAJ. He
explained that after the Zero Balance Date there is an
inverse correlation between the amount of non-Azerbaijani oil
that flows through BTC and Azerbaijani ownership of the
pipeline, and that BTC expansion would result in decreased
GOAJ ownership of the pipeline, from 85 percent for
Azerbaijan and 15 percent for Kazakhstan to 47 percent for
Azerbaijan and 53 percent for Kazakhstan. Abdullayev said
that while Socar was fine sending 1 mmbd through BTC, for 1.2
mmbd there would have to be "new commercial conditions and
terms."


7. (C) Speaking more generally, Abdullayev said that while
the ACG PSA was signed in 1994, BP began creating problems in
July 2007 (i.e. the date it informed Socar of the revised
method for calculating Rate of Return). He named recently
departed BP Azerbaijan Vice-President Dr. Phil Home as the
"troublemaker" primarily responsible.

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8. (C) Ambassador Derse asked Abdullayev if the recently
agreed upon April 1 profit split shift to 80-20 percent in
favor of Azerbaijan meant that SOCAR would proceed with
discussing ACG Deep Gas development with the ACG Consortium.
Abdullayev said that BP's actions had led to Socar "losing a
year," and that it still had other outstanding issues with BP
it needed to solve before moving on ACG Deep Gas.


9. (C) COMMENT: SOCAR has been consistent in its marked
aversion to publicity in relation to its efforts to
strengthen its energy links with Europe, saying it only
serves to needlessly irritate Russia. Embassy is encouraged
by hearing from Socar that Nabucco negotiations are more
advanced than portrayed in the press. Continued SOCAR-BP
acrimony threatens the timely development of ACG Deep Gas.
Embassy will continue to seek clarification on pending issues
between the two. END COMMENT.
DERSE