ISA: REPORTED REPSOL (SPAIN) VENTURES IN IRANIAN

C O N F I D E N T I A L SECTION 01 OF 02 MADRID 001155

SIPDIS

STATE FOR EEB/ESC:HAMANG, EEB/TFS:BACKEMEYER,
NEA/IR:WADHWANI

E.O. 12958: DECL: 12/02/2019
TAGS: ECON EINV ENRG EPET ETTC IR SP
SUBJECT: ISA: REPORTED REPSOL (SPAIN) VENTURES IN IRANIAN
OIL/GAS SECTOR

REF: STATE 121808

Classified By: Charge Arnold A. Chacon for reasons 1.4(b) and (d)

1.(U) As requested in reftel, econoffs informed Foreign
Ministry and Ministry of Industry, Tourism, and Commerce
officials of the Congressional letter and the Department's
initiation of its review. Econoffs made reftel points about
the ISA, pending legislation, and the importance of not
giving business-as-usual signals by investing in Iran's oil
and gas sector at this time. Charge discussed the review
with Secretary of State (deputy minister) for Trade Silvia
Iranzo on November 27.

2.(SBU) Econcouns discussed Repsol's past and potential Iran
activities on December 1 with Repsol institutional relations
director Arturo Gonzalo, upstream legal services director
Pablo Blanco, and deputy director of international
institutional relations Maribel de Luis. They provided the
following information on the named projects.

3.(C) Forooz Exploration Block (18 on the emailed
spreadsheet): This was an exploration contract for two
offshore blocks, one Mehr block of 5,092 square km and one
Forooz block of 8,385 square km. Repsol signed a buyback
contract on October 14, 2004. There were no other partners
in the venture. No commercial production resulted from this
contract, which expired in 2008. There was no follow-on
contract, and Repsol considers the venture abandoned.

4.(C) Iranmehr Exploration Block (19 on the spreadsheet, but
from what Repsol officials said, it may be the same project
as 8 on the spreadsheet): Repsol describes this as an
exploration contract for a Mehr onshore block of 2,500 square
km. It was originally signed by the Austrian firm OMV on
April 23, 2001. Repsol entered in 2002, taking a 33% stake.
Another firm, Sipetrol, which Gonzalo thought was Chilean,
also took a 33% stake at that time. OMV was the operator.
The contract expired in 2008. There was no follow-on
contract, and Repsol considers the venture abandoned.

5.(C) Persian LNG South Pars phase 13/14 project (45 on the
spreadsheet): This is an integrated upstream and midstream
project with a possible gas liquefication plant at Tombak.
In 2004, Shell and Repsol signed an agreement with the NIOC
to develop the project. Stakes were 50% NIOC, 25% Shell, and
25% Repsol. Separately, Shell and Repsol each had a 50%
interest in an upstream service contract that was signed in
January 2007 that established conditions for exploration and
development of the project. This contract foresaw the supply
conditions of the possible Tombak liquefication plant, which
would have two trains of 8 million tons each. Shell and
Repsol each would have rights to 50% of the first train (4
million tons),while the second train would be for NIOC.

6.(C) Gonzalo confirmed that there has been no final
investment decision on this project, which is very much on
hold. He said that Iranian legislation that had taken effect
in January limited NIOC's participation in midstream projects
to 20%, so the project would have to be restructured. In
parallel, NIOC was asking for early development of the
upstream project to supply domestic demand. He again
emphasized that no decision had been taken.

7.(C) Citing EEB DAS Hengel's October phone conversation with
Repsol Director General for Upstream Nemesio
Fernandez-Cuesta, Gonzalo said that Repsol was seeking to
reduce its participation in the project. He said Repsol and
Shell were in negotiations to bring in a new partner.
(Gonzalo did not identify the partner, citing a nondisclosure
commitment, and he neither confirmed nor denied that it was
the company cited in the spreadsheet.) Their aim was not to
increase the investment in the project, but to reduce the
existing partners' stake in it. Repsol wanted to keep a
maximum of 20% of the upstream project and 10% of the
midstream project.

8.(C) Gonzalo said Repsol had no other Iran-related projects
either operating or under consideration.

9.(SBU) In this discussion and previous conversations
December 1, Econcouns confirmed Repsol's understanding of the
ISA, pending legislation, and the strongly held USG view that
this was not the time to do anything that would suggest
business as usual with Iran. Gonzalo acknowledged Repsol's
understanding of these issues. He also noted that the USG

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was aware based on previous discussions that Repsol was
subject to EU regulations related to extraterritorial
legislation. Gonzalo emphasized that Repsol valued its fluid
communication with the USG, and he offered to provide
additional information if necessary.
CHACON