Identifier
Created
Classification
Origin
09MOSCOW2138
2009-08-20 12:15:00
CONFIDENTIAL
Embassy Moscow
Cable title:
CONOCOPHILLIPS COMMENTS ON RUSSIA-VENEZUELA OIL
how-toVZCZCXRO7107 PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR DE RUEHMO #2138 2321215 ZNY CCCCC ZZH P 201215Z AUG 09 FM AMEMBASSY MOSCOW TO RUEHC/SECSTATE WASHDC PRIORITY 4578 INFO RUCNCIS/CIS COLLECTIVE PRIORITY RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY RUEHCV/AMEMBASSY CARACAS PRIORITY 0302 RHEHNSC/NSC WASHDC PRIORITY RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
C O N F I D E N T I A L MOSCOW 002138
SIPDIS
DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND WRIGHT, S/EEE
MORNINGSTAR
DOE FOR HEGBURG, EKIMOFF
DOC FOR JBROUGHER
NSC FOR MMCFAUL, JELLISON
E.O. 12958: DECL: 08/20/2019
TAGS: EPET ENRG ECON PREL RS VE
SUBJECT: CONOCOPHILLIPS COMMENTS ON RUSSIA-VENEZUELA OIL
JOINT-VENTURE
Classified By: Acting Econ MC John C. Stepanchuk for Reasons 1.4 (b/d)
---------------------
"ECONOMICS NOT THERE"
---------------------
C O N F I D E N T I A L MOSCOW 002138
SIPDIS
DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND WRIGHT, S/EEE
MORNINGSTAR
DOE FOR HEGBURG, EKIMOFF
DOC FOR JBROUGHER
NSC FOR MMCFAUL, JELLISON
E.O. 12958: DECL: 08/20/2019
TAGS: EPET ENRG ECON PREL RS VE
SUBJECT: CONOCOPHILLIPS COMMENTS ON RUSSIA-VENEZUELA OIL
JOINT-VENTURE
Classified By: Acting Econ MC John C. Stepanchuk for Reasons 1.4 (b/d)
--------------
"ECONOMICS NOT THERE"
--------------
1. (C) A senior ConocoPhillips executive (protect) told us on
July 20 that the JV set up between a consortium of Russian
companies (state-owned Gazprom and Rosneft, Lukoil, TNK-BP,
and Surgutneftegaz) and Venezuela's national oil company,
PDVSA, is unlikely to yield the results Russian and
Venezuelan leaders have suggested. (Note: ConocoPhillips
owns 20% of Lukoil, with which it enjoys a strategic
partnership. End note.) Russian DPM Igor Sechin, who is in
charge of the energy sector, and Venezuelan Vice President
Ramon Carrizalez touted the JV at an August 17 meeting in St.
Petersburg. Sechin and Carrizalez claimed that PDVSA and the
Russian consortium, known as the NPC, would invest $30
billion in projects in Venezuela over the next 40 years.
2. (C) Our contact, however, is "highly skeptical" that the
JV will be able to produce its goal of almost 1 million
barrels per day by 2015. He described the NPC as "a poorly
staffed consortium with no experience -- kids, really, with
little experience." That this entity and PDVSA would deliver
1 million bpd from the Orinoco in five years, he said, is
"preposterous." That said, the NPC has "a lot of horsepower"
behind it as it is chaired by Sechin and the CEOs of the five
companies serve as the board. According to our contact,
Venezuela is requiring the Russian partners to secure
refining capacity in the U.S. and the NPC has thus sent a
letter to five U.S. refiners, including ConocoPhillips and
ExxonMobil, seeking partnerships to refine the expected crude.
3. (C) The ConocoPhillips executive said Lukoil and Gazprom
counterparts have told him they are disinterested in the
project. He believes that Sechin's strong backing of the
project simply makes it a political necessity for the
companies to participate. He added that because "the
economics are not there," he expects to see "a lot of
foot-dragging." Another ConocoPhillips executive expressed
similar sentiments, saying Lukoil is "unenthused about the
project" and "dismissive" of the effort, but will "go along
for the ride." A TNK-BP executive also indicated to us that
his company is "not enthusiastic" but is "willing to continue
to study" the opportunity.
--------------
COMMENT
--------------
4. (C) The GOR's MO on foreign trips is to sign "agreements,"
"deals," and "protocols." Most are simply pieces of paper to
give the principals of any given meeting something to show
for the visit. Sometimes the GOR compels its companies to
actually engage and invest in non-commercial efforts to
demonstrate tangible results, as it appears to have in
Venezuela. Fortunately, these efforts are usually doomed to
fail under their own weight. Strapped with a record budget
deficit, the GOR is unlikely to be able to sustain forced
multi-billion dollar subsidies of an uneconomical venture.
End comment.
RUBIN
SIPDIS
DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND WRIGHT, S/EEE
MORNINGSTAR
DOE FOR HEGBURG, EKIMOFF
DOC FOR JBROUGHER
NSC FOR MMCFAUL, JELLISON
E.O. 12958: DECL: 08/20/2019
TAGS: EPET ENRG ECON PREL RS VE
SUBJECT: CONOCOPHILLIPS COMMENTS ON RUSSIA-VENEZUELA OIL
JOINT-VENTURE
Classified By: Acting Econ MC John C. Stepanchuk for Reasons 1.4 (b/d)
--------------
"ECONOMICS NOT THERE"
--------------
1. (C) A senior ConocoPhillips executive (protect) told us on
July 20 that the JV set up between a consortium of Russian
companies (state-owned Gazprom and Rosneft, Lukoil, TNK-BP,
and Surgutneftegaz) and Venezuela's national oil company,
PDVSA, is unlikely to yield the results Russian and
Venezuelan leaders have suggested. (Note: ConocoPhillips
owns 20% of Lukoil, with which it enjoys a strategic
partnership. End note.) Russian DPM Igor Sechin, who is in
charge of the energy sector, and Venezuelan Vice President
Ramon Carrizalez touted the JV at an August 17 meeting in St.
Petersburg. Sechin and Carrizalez claimed that PDVSA and the
Russian consortium, known as the NPC, would invest $30
billion in projects in Venezuela over the next 40 years.
2. (C) Our contact, however, is "highly skeptical" that the
JV will be able to produce its goal of almost 1 million
barrels per day by 2015. He described the NPC as "a poorly
staffed consortium with no experience -- kids, really, with
little experience." That this entity and PDVSA would deliver
1 million bpd from the Orinoco in five years, he said, is
"preposterous." That said, the NPC has "a lot of horsepower"
behind it as it is chaired by Sechin and the CEOs of the five
companies serve as the board. According to our contact,
Venezuela is requiring the Russian partners to secure
refining capacity in the U.S. and the NPC has thus sent a
letter to five U.S. refiners, including ConocoPhillips and
ExxonMobil, seeking partnerships to refine the expected crude.
3. (C) The ConocoPhillips executive said Lukoil and Gazprom
counterparts have told him they are disinterested in the
project. He believes that Sechin's strong backing of the
project simply makes it a political necessity for the
companies to participate. He added that because "the
economics are not there," he expects to see "a lot of
foot-dragging." Another ConocoPhillips executive expressed
similar sentiments, saying Lukoil is "unenthused about the
project" and "dismissive" of the effort, but will "go along
for the ride." A TNK-BP executive also indicated to us that
his company is "not enthusiastic" but is "willing to continue
to study" the opportunity.
--------------
COMMENT
--------------
4. (C) The GOR's MO on foreign trips is to sign "agreements,"
"deals," and "protocols." Most are simply pieces of paper to
give the principals of any given meeting something to show
for the visit. Sometimes the GOR compels its companies to
actually engage and invest in non-commercial efforts to
demonstrate tangible results, as it appears to have in
Venezuela. Fortunately, these efforts are usually doomed to
fail under their own weight. Strapped with a record budget
deficit, the GOR is unlikely to be able to sustain forced
multi-billion dollar subsidies of an uneconomical venture.
End comment.
RUBIN