HYPERDYNAMICS DELEGATION ELBOWED OUT BY CHINESE

C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 000559

SIPDIS
SENSITIVE

E.O. 12958: DECL: 03/16/2019
TAGS: ECON EPET EINV PGOV EMIN ECIN PREL GV
SUBJECT: HYPERDYNAMICS DELEGATION ELBOWED OUT BY CHINESE

REF: A. CONAKRY 00436

B. CONAKRY 00470

Classified By: ECONOFF BRIANA WARNER FOR REASONS 1.4 (B) AND (D)


1. (C) Summary: According to a visiting delegation from
American oil-interest Hyperdynamics (HDY),the GOG is working
with the Chinese Embassy to award HDY's 31,000 sq. mile oil
exploration concession to Chinese investors. In an effort to
save their concession, the one-asset firm sent their newly
appointed CEO and a former Assistant Secretary of State for
African Affairs (and career Foreign Service Officer) to
advocate on their behalf. According to the delegation, HDY's
new management is willing to relinquish a large portion of
their concession to counter Chinese competition. Meetings
with CNDD officials however, did not yield positive prospects
for the company. END SUMMARY.


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NEW MANAGEMENT, SAME SITUATION
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2. (C) Newly appointed HDY CEO Ray Leonard and former
Assistant Secretary of State for African Affairs Herman
Cohen, also an HDY shareholder, visited Guinea from September
6-10 to convince the CNDD to respect their 31,000 sq. mile
contract. Arguing that the company's concession is
unrealistically large, the CNDD has waged a campaign to push
HDY out of the country since they took power in December 2008
(reftel). Leonard, an oil-industry veteran of more than
twenty-five years, told A/DCM and EconOff that he intended to
fix the mistakes of his predecessor and regain GOG favor.



3. (C) According to Leonard, his predecessor mismanaged the
company and negotiated a contract that was "well beyond the
industry norm" in the favor of HDY. Leonard feels that the
GOG is justified in wanting to address the unfair contract.
Leonard said that they hoped to work out an amicable deal
with the GOG, noting that "it is just not realistic to keep
all of the offshore concession."



4. (C) Cohen and Leonard apparently held meetings with CNDD
President Moussa Dadis Camara, Secretary of Defense Sekouba
Kounate, Secretary General of the Presidency Moussa Keita,
and Minister of Mines and Energy Mahmoud Thiam to discuss a
timeline to relinquish parts of the concession. The
delegation was apparently warmly received by Dadis and other
CNDD members (septel). Reportedly, Minister Thiam seemed
initially impressed by HDY's new strategy, saying that he was
relieved to hear about the change in plans as he was "about
to make war on Hyperdynamics."



5. (C) In the meeting with Moussa Keita, Cohen and Leonard
expressed HDY's willingness to give up parts of their
concession, but only under the condition that HDY receive a
new valid contract. Keita apparently agreed and HDY began
working on a draft outlining an official timeline for
relinquishment.


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THE CHINESE FACTOR
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6. (C) While drafting the letter on the afternoon of
September 8, HDY began to hear rumors that an unknown Chinese
company had made a new proposal to Minister Thiam directly
after Leonard and Cohen spoke to Keita. When HDY
representatives went to the Ministry of Mines to present
their case, as scheduled, they were told to return at 10:30
the next day for a meeting with Minister Thiam. Leonard
believes that HDY negotiations were used as a means to
"leverage the Chinese to up their ante and offer a better
price for the offshore oil rights."



7. (C) On September 9, as Leonard and Cohen were waiting for
their meeting with Minister Thiam, the Chinese Ambassador to
Guinea entered the waiting room and was immediately ushered
into the Minister's office. Leonard said that they were
almost literally "elbowed out of the way by the Chinese
Ambassador." Two hours later, while the HDY representatives

CONAKRY 00000559 002 OF 002


were still waiting, the Chinese Ambassador apparently came
out of the office with a smile. Minister Thiam's secretary
subsequently told Leonard and Cohen that the Minister could
not meet with them that morning. Instead, they were to wait
to meet with Thiam on September 10, when "everything would be
resolved." Leonard, fearing that the Chinese Embassy was
helping to negotiate a deal for China Sonangol, told EconOff
and A/DCM that "something is happening that is violating
sanctity of contract."



8. (C) Though Cohen returned to the U.S. as scheduled on the
evening of September 9, Leonard extended his stay in order to
"follow-through" with the Ministry of Mines. He asked what
A/DCM and EconOff were planning to do about growing Chinese
investment in Guinea's economy. He also asked if the Embassy
could advocate on behalf of HDY. A/DCM explained that it is
not USG policy to counteract Chinese investment. She also
explained that the CNDD has demonstrated little respect for
contractual agreements, and that any USG intervention would
be unlikely to have positive results. Furthermore, A/DCM
clarified the USG's policy position with respect to Guinea,
emphasizing that commercial advocacy would be very difficult,
if not impossible, due to the fact that the USG does not
recognize the military junta as a legitimate government.
Perhaps more significantly, Post continues to have concerns
over FCPA issues involving HDY.


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COMMENT
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9. (C) While HDY's new management seems to have a great deal
of institutional experience and a much more feasible business
plan than they have in the past, they seem desperate to
maintain a piece of their concession in the face of Chinese
competition. Embassy sources have reported that HDY's
contract has already been awarded to Chinese Sonangol in
full. It seems that HDY still believes that the legality of
their contract holds weight with the CNDD, despite the fact
that several larger international companies have had their
contracts revoked and their operations halted.



10. (C) The fact that the Chinese Ambassador was supposedly
advocating on behalf of Chinese Sonangol is not a surprise,
but it is in stark contrast to several sources within the
mining sector who have said that the Chinese Embassy is not
working with the Chinese International Fund (CIF) or Sonangol
in Guinea (reftel).
BROKENSHIRE