CONOCOPHILLIPS CEO BEING WOOED BY SECHIN, GAZPROM

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000970 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: 04/14/2019 TAGS: EPET ENRG ECON PREL PINR RS SUBJECT: CONOCOPHILLIPS CEO BEING WOOED BY SECHIN, GAZPROM REF: 07 MOSCOW 2802 Classified By: Ambassador John R. Beyrle for Reasons 1.4 (b/d) -------------- Summary -------------- ¶1. (C) In an April 14 meeting with the Ambassador, ConocoPhillips Chairman and CEO Jim Mulva (strictly protect) said his company's alliance with Lukoil is going well and that ConocoPhillips is likely to join Lukoil in bidding on the West Qurna field in Iraq. He said ConocoPhillips is interested in further strategic opportunities in Russia. They have been discussing possible projects with Gazprom, which in turn is interested in selling LNG to the U.S. market and expanding internationally. Mulva said Deputy Prime Minister Igor Sechin separately indicated to him an interest in having ConocoPhillips expand its presence in Russia. Mulva described Sechin as "gracious" and eager to do business with his company. Lukoil CEO Vagit Alekperov, however, had warned Mulva to be wary of Sechin. While Alekperov's caution may be justified, we believe Sechin's overture offers at least some indication that the GOR's attitude toward the U.S., and U.S. companies, is indeed shifting for the better. End summary. -------------- Lukoil in Iraq -------------- ¶2. (C) Mulva told the Ambassador that ConocoPhillips would likely join Lukoil "and other companies" in a consortium to bid on the West Qurna field in Iraq. He said Lukoil is interested in getting its Saddam-era contract on West Qurna restored, "under new terms" acceptable to the Iraqis. He said Prime Minister Maliki's recent visit to Moscow yielded some positive indications that the government of Iraq may be open to the idea, perhaps tying it to further debt relief. According to Mulva, PM Putin is willing to offer debt relief, but only if Lukoil can get back into West Qurna. ¶3. (C) Mulva said that in general ConocoPhillips is interested in doing business with Russian companies internationally. However, he said Russian companies are poorly received abroad due to the GOR's heavy-handed approach to international business. According to Mulva, Lukoil's CEO Vagit Alekperov, with whom he has developed a strong personal relationship, has figured this out. However, he is an exception among senior Russian businessmen in the sector. -------------- OPPORTUNITIES WITH GAZPROM -------------- ¶4. (C) Mulva said one company with whom ConocoPhillips has been discussing joint projects internationally for some time is Gazprom. He had met earlier that day with Gazprom CEO Aleksey Miller and had told him that ConocoPhillips could help Gazprom expand internationally but that it would need access to some "strategic asset" in Russia in return. Mulva noted, however, that Alekperov had told him it was unlikely that the GOR would issue any new licenses for strategic fields in 2009, given the low price of oil. ¶5. (C) Mulva said one option for Gazprom might be to buy ConocoPhillips's assets in Venezuela, where, he said, his company is "holding its own" but is mired in legal challenges to expropriation actions by the government of Venezuela. He said this idea is "making the circles" in the GOR. Another option is for ConocoPhillips to sell Gazprom its assets in Nigeria, which he described as "a basket case" that ConocoPhillips would prefer to get out of. ¶6. (C) Mulva said Gazprom has a long-term interest in selling gas to the U.S. market. He said Gazprom realizes the political complications of owning assets in the U.S., and is instead looking for partners to help it sell LNG in the U.S. market. To that end, Miller suggested the possibility of ConocoPhillips helping Gazprom develop gas fields in the Yamal peninsula from which to eventually supply LNG to the U.S. However, Mulva said the geography of Yamal was not currently conducive to LNG shipments, given that the region is ice-bound much of the year. ¶7. (C) Mulva said the strategic asset in Russia in which ConocoPhillips is most interested is the Trebs and Titov deposits in Northwest Russia, near where ConocoPhillips and Lukoil already have a project. The fields, which may hold 1 billion barrels of oil, could be easily linked to the infrastructure the two companies have already developed in the area. ¶8. (C) Mulva said Gazprom's oil subsidiary, Gazpromneft, could join the consortium and might be able to help overcome the GOR's designation of the filed as "strategic," which is a complicating factor for ConocoPhillips's potential involvement. He said Miller told him that Gazprom is not opposed to ConocoPhillips becoming a partner in this development, but that Gazprom will want 51% control. -------------- SECHIN -------------- ¶9. (C) Mulva said he also met with DPM Sechin earlier that day, his second meeting with Sechin this year. He said Sechin had enthusiastically welcomed ConocoPhillips investments in Russia. Mulva and Don Wallette, ConocoPhillips's Russia and Caspian President, both portrayed Sechin as exceedingly gracious, charming, and eager to do business with ConocoPhillips. At their first meeting Sechin had them meet with most of the major Russian players in the oil sector. ¶10. (C) Mulva and Wallette said Sechin had accepted in principle the idea of an international consortium possibly bidding on Trebs and Titov licenses. However, Mulva said a complicating factor was the rumored animosity between Miller and Sechin, given that Sechin controls energy policy in Russia and could block the license. Sechin might be more interested in having ConocoPhillips join forces with state-owned Rosneft, of which Sechin is chairman, rather than with Gazprom. ¶11. (C) In that regard, Mulva said he was wary of doing business with Sechin. Alekperov had warned him to "be very careful" in dealing with Sechin. According to Mulva, Alekperov said that Sechin is only interested in "being the gatekeeper" for all information about the oil and gas sector and would try to use ConocoPhillips without offering anything of value in return. The Ambassador noted in response that Sechin's real expertise lay in gathering information and agreed that Alekperov's warning should be taken seriously. -------------- COMMENT -------------- ¶12. (C) Sechin's overtures to ConocoPhillips would appear to be further evidence that the warming trend in bilateral relations has reached the energy sector, following the recent approval of ExxonMobil's operating budget for Sakhalin 1. It may also be indicative of a renewed realization on the part of some key GOR officials that Russia needs Western investment and know-how in the oil and gas sector if its hopes to remain at the top of the energy game. While we welcome this apparent warming toward U.S. companies, we are waiting to see it translated into concrete actions. BEYRLE