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)

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Summary
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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.

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Lukoil in Iraq
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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.

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OPPORTUNITIES WITH GAZPROM
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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.

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SECHIN
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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.

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COMMENT
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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