Identifier
Created
Classification
Origin
09MOSCOW907
2009-04-09 12:08:00
CONFIDENTIAL
Embassy Moscow
Cable title:
(C) EXXONMOBIL CREDITS "RESET" WITH PASSAGE OF
how-toVZCZCXRO3665 PP RUEHDBU RUEHDE RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR RUEHTRO DE RUEHMO #0907 0991208 ZNY CCCCC ZZH P 091208Z APR 09 FM AMEMBASSY MOSCOW TO RUEHC/SECSTATE WASHDC PRIORITY 2818 INFO RUCNCIS/CIS COLLECTIVE PRIORITY RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY RUCNGEC/GECF COLLECTIVE PRIORITY 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 000907
SIPDIS
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT
DOE FOR HEGBURG, EKIMOFF
DOC FOR JBROUGHER
NSC FOR MMCFAUL, JELLISON
E.O. 12958: DECL: 04/09/2019
TAGS: EPET ENRG ECON PREL RS
SUBJECT: (C) EXXONMOBIL CREDITS "RESET" WITH PASSAGE OF
SAKHALIN 1 BUDGET
REF: A. MOSCOW 424
B. MOSCOW 266
Classified By: Acting Econ MC John Stepanchuk for Reasons 1.4 (b/d)
---------------
BUDGET APPROVED
---------------
C O N F I D E N T I A L MOSCOW 000907
SIPDIS
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT
DOE FOR HEGBURG, EKIMOFF
DOC FOR JBROUGHER
NSC FOR MMCFAUL, JELLISON
E.O. 12958: DECL: 04/09/2019
TAGS: EPET ENRG ECON PREL RS
SUBJECT: (C) EXXONMOBIL CREDITS "RESET" WITH PASSAGE OF
SAKHALIN 1 BUDGET
REF: A. MOSCOW 424
B. MOSCOW 266
Classified By: Acting Econ MC John Stepanchuk for Reasons 1.4 (b/d)
--------------
BUDGET APPROVED
--------------
1. (C) Zeljko Runje, ExxonMobil's local Vice President in
charge of Sakhalin 1, confirmed to us April 9 that the
project's budget, after months of delays (reftels),has been
approved by the GOR. According to Runje, field development
that had been put on hold would be resumed and that about
2000 employees who had been laid off would soon return to
work. He said the Authorized State Body (ASB, the entity
charged with overseeing the project for the GOR) had
"approved everything," including a 2008 budget supplement
request, the 2009 request, and all cost overruns from
2003-2007. Runje said the ASB even approved about $50
million of costs resulting from the delay in approving the
budget and work plans. ExxonMobil is cautiously optimistic
regarding the ASB's decision. "We're happy for now," Runje
said, "but you never know what they'll hit you with tomorrow."
2. (C) Runje said press reports indicating that the ASB was
still expecting further explanations refer to a request by
the ASB for the ExxonMobil-led Sakhalin 1 consortium to
justify why the project pays many employees in Houston.
Runje explained that the project, like nearly all of
ExxonMobil's projects around the world, relies on constant
consulting expertise from a Houston-based ExxonMobil
engineering center which charges for those services.
-------------- --------------
"ABSOLUTELY, WITHOUT A DOUBT," DUE TO THE "RESET"
-------------- --------------
3. (C) Citing his Kremlin sources, Runje said he believed the
"foreign policy side of the Kremlin" had convinced President
Medvedvev to direct the Energy Ministry to move on the
Sakhalin 1 budget. Runje repeatedly credited improved
U.S.-Russian relations for the positive outcome, saying
"there is absolutely no doubt" that the budget approval is
due to the "reset." (Note: Per reftels, ExxonMobil had
maintained that the Sakhalin 1 budget impasse was politically
motivated. End note.)
--------------
COMMENT
--------------
4. (C) It would be difficult to know for sure whether Runje
is correct in his assessment of the GOR's motivations in this
case. Regardless, for the time being, the GOR appears to
have done the right thing at the right time to prevent
further damage to Russia's international image and to
facilitate needed foreign investment.
BEYRLE
SIPDIS
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT
DOE FOR HEGBURG, EKIMOFF
DOC FOR JBROUGHER
NSC FOR MMCFAUL, JELLISON
E.O. 12958: DECL: 04/09/2019
TAGS: EPET ENRG ECON PREL RS
SUBJECT: (C) EXXONMOBIL CREDITS "RESET" WITH PASSAGE OF
SAKHALIN 1 BUDGET
REF: A. MOSCOW 424
B. MOSCOW 266
Classified By: Acting Econ MC John Stepanchuk for Reasons 1.4 (b/d)
--------------
BUDGET APPROVED
--------------
1. (C) Zeljko Runje, ExxonMobil's local Vice President in
charge of Sakhalin 1, confirmed to us April 9 that the
project's budget, after months of delays (reftels),has been
approved by the GOR. According to Runje, field development
that had been put on hold would be resumed and that about
2000 employees who had been laid off would soon return to
work. He said the Authorized State Body (ASB, the entity
charged with overseeing the project for the GOR) had
"approved everything," including a 2008 budget supplement
request, the 2009 request, and all cost overruns from
2003-2007. Runje said the ASB even approved about $50
million of costs resulting from the delay in approving the
budget and work plans. ExxonMobil is cautiously optimistic
regarding the ASB's decision. "We're happy for now," Runje
said, "but you never know what they'll hit you with tomorrow."
2. (C) Runje said press reports indicating that the ASB was
still expecting further explanations refer to a request by
the ASB for the ExxonMobil-led Sakhalin 1 consortium to
justify why the project pays many employees in Houston.
Runje explained that the project, like nearly all of
ExxonMobil's projects around the world, relies on constant
consulting expertise from a Houston-based ExxonMobil
engineering center which charges for those services.
-------------- --------------
"ABSOLUTELY, WITHOUT A DOUBT," DUE TO THE "RESET"
-------------- --------------
3. (C) Citing his Kremlin sources, Runje said he believed the
"foreign policy side of the Kremlin" had convinced President
Medvedvev to direct the Energy Ministry to move on the
Sakhalin 1 budget. Runje repeatedly credited improved
U.S.-Russian relations for the positive outcome, saying
"there is absolutely no doubt" that the budget approval is
due to the "reset." (Note: Per reftels, ExxonMobil had
maintained that the Sakhalin 1 budget impasse was politically
motivated. End note.)
--------------
COMMENT
--------------
4. (C) It would be difficult to know for sure whether Runje
is correct in his assessment of the GOR's motivations in this
case. Regardless, for the time being, the GOR appears to
have done the right thing at the right time to prevent
further damage to Russia's international image and to
facilitate needed foreign investment.
BEYRLE