NIGERIAN MEDIATORS INCLUDED IN PIB PROCESS

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000447 SENSITIVE SIPDIS COMMERCE FOR KBURRESS AFRICOM FOR CGAY TREASURY FOR DPETERS, RHALL, RABDULRAZAK STATE PASS USTR FOR LISER, AGAMA STATE PASS OPIC FOR ZHAN, MSTUCKART, JEDWARDS STATE PASS TDA FOR EEBONG, DSHUSTER STATE PASS EXIM FOR JRICHTER STATE PASS USAID FOR NFREEMAN, GBERTOLIN USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS E.O. 12958: DECL: 11/30/2019 TAGS: EPET ECON EFIN EINV PGOV NI SUBJECT: NIGERIAN MEDIATORS INCLUDED IN PIB PROCESS LAGOS 00000447 001.6 OF 002 Classified By: CG Donna Blair for reasons 1.4 (b & d) -------------- SUMMARY -------------- ¶1. (C) Vice President Goodluck Jonathan met with GON and private sector representatives to bridge their Petroleum Industry Bill (PIB) gap. "Ten wisemen" are to be involved in PIB negotiations moving forward in a three-stage process. Progress was made with gas and shallow water fields while mid-stream definitions need more work. The PIB deep water provisions are improving. Observers expect the PIB to pass sometime early 2010. END SUMMARY ¶2. (C) Shell Vice President Ann Pickard and Shell representative on the Oil Producers Trade Section (OPTS) Stuart McGeoch told Economic Officer that Vice President Goodluck Jonathan held a meeting with members of the GON and private industry October 27. Present at the meeting were the following: Ministry of Finance (MOF),Ministry of Petroleum (MOP),Ministry of Justice (MOJ),the Special Advisor to the President for Petroleum Matters, Nigerian National Petroleum Corporation (NNPC),and representatives of the International Oil Companies (IOCs) including ExxonMobil, Chevron, Shell, Conoco as well as Nigerian oil companies Oando and Dubri. Eight of the "ten old wisemen" (or ten retired Nigerians who used to be senior staffers in the oil industry) were expected at the meeting but were missing. The two wisemen who attended were Funsho Kupo Wokman and a former NNPC general director who only gave his name as Charles. -------------- PIB MEETINGS A THREE-STAGE PROCESS -------------- ¶3. (C) Wokman stated in his role as mediator that the PIB needs to be sensible and strike an optimal balance between taxes and government take. VP Jonathan wants a final bill that is good for Nigeria and good for the IOCs while stating that he was aware of a disconnect between GON and industry and that both sides understood the gap . Special Advisor to the President for Petroleum Matters Dr. Egbogah said that the new draft is almost complete and mostly changes the licensing regime. This would not be the last draft, Egbogah maintained. ¶4. (C) This meeting was considered step one with step two constituting an off-line meeting between the ten old wisemen, the GON officials, and the oil companies (both Nigerian and IOC). VP Jonathan was not expected to be present at the second meeting. The third step would be a meeting the VP would attend and determine how to address roadblocks, if the second meeting did not result in anything actionable. The second meeting was expected to take place sometime during the week of November 9. Nothing is known about this second meeting. -------------- -------------- IMPROVEMENTS IN SHALLOW WATER, MORE NEEDED ON DEEP WATER -------------- -------------- ¶5. (C) The meeting with the ten wise men was considered to be the first meeting of substance between industry and an interagency group. Improvements were noted on the gas and shallow water portions of the PIB with work still needed on deep water projects, especially relating to fiscal matters. Deep water is improving but is "not over the finish line yet," according to Shell's McGeoch. Relinquishment of leases after one year, definition of how mid-stream applies to platforms, and infrastructure between the shore and the terminal were also up for negotiation. McGeoch stated that there was still "a long way to go" b before the two sides LAGOS 00000447 002.3 OF 002 could agree. ¶6. (C) There were more positive behind-the-scenes changes beyond gas, stated GON consultant Dr. Pedro van Meurs. "Use or lose" allowances to offset higher tax rates for small fields were at stake. That privilege is taken away if the company does not write off expenses by the end of the first year. The IOCs are arguing that they are not in a position to write off expenses in small fields until the second year, if not longer. The PIB also does not deal with on-shore fields with massive amounts of gas beneath the oil. -------------- PIB TO PASS EARLY IN 2010 -------------- ¶7. (C) McGeoch was pleased with the discussions at the first meeting but likened it to "passing the ball in front of the net without trying to score." The trick is to take the ideas that have been talked over and turn them into successful law. McGeoch thought that passage of the PIB would happen in early 2010 with a chance that it might happen before the Christmas holidays. ExxonMobil,s Halladay said the PIB will not be passed this year if it is not passed in the next two weeks. BLAIR