VZCZCXRO1027
RR RUEHBC RUEHDBU RUEHDE RUEHKUK RUEHLH RUEHMOS RUEHPA RUEHPW
DE RUEHNK #0170/01 0481251
ZNY CCCCC ZZH
R 171251Z FEB 06
FM AMEMBASSY NOUAKCHOTT
TO RUEHC/SECSTATE WASHDC 5184
INFO RUEHZK/ECOWAS COLLECTIVE
RUCNISL/ISLAMIC COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0221
RUEHBAD/AMCONSUL PERTH 0185
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEKDIA/DIA WASHDC
RUEHNO/USMISSION USNATO 0133

C O N F I D E N T I A L SECTION 01 OF 02 NOUAKCHOTT 000170 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF/W; AF/EPS (A. ADLER, J. HAENI); 
EB/ESC/IEC (K. RIOS); EB/CBA (D. WINSTEAD) 
USDOC FOR 4510/IEP/ANESA/OA/PMICHELINI 
USDOC FOR 6930/ITA/MAS/MFG/OEEI/ABRICKMAN 
DAKAR FOR RSCO CGRIFFIN 
 
E.O. 12958: DECL: 02/17/2015 
TAGS: BBSR EINV EPET ECON EFIN ASEC MR
SUBJECT: WOODSIDE DISPUTE CONTINUES AS CEO SET TO ARRIVE 
 
REF: A. NOUAKCHOTT 111 
     ¶B. NOUAKCHOTT 67 
 
Classified By: Ambassador Joseph LeBaron, Reasons 1.4 (b),(d) 
 
--------------- 
(C)  KEY POINTS 
--------------- 
 
--  The Mauritania/Woodside dispute continues to be played 
out in the press, as Woodside CEO Don Voelte is expected to 
arrive in Mauritania on February 18.  Meanwhile, the Embassy 
has learned that Woodside Country Manager (and Amcit) Jon 
Ozturgut has been served a subpoena to testify in former oil 
minister Zeidan's corruption case. 
 
--  The Mauritanian government has announced that Zeidan will 
be judged by a criminal court and could receive a maximum 
sentence of life in prison. 
 
--  In a meeting with Ambassador, Woodside executive Gary 
Gray strongly indicated that Woodside may not be keen on 
future operations in Mauritania. 
 
--  Mauritania has announced it will set up a state bank 
account to manage all oil revenues as part of EITI and its 
own transparency measures. 
 
----------- 
(C) COMMENT 
----------- 
 
-- Gray's visit seemed more for him to get a feel of the 
situation on the ground and to discuss with other observers 
(including Ambassador) rather than to advance discussions. 
 
-- We suspect he was warned by several of the parties not to 
discount too readily the transitional government's motives of 
trying to root out corruption and create a more transparent 
process. 
 
--  However, Gray indicated that Woodside intended to hold 
its line and take the case to arbitration. 
 
End Key Points and Comment. 
 
¶1. (C) Woodside Director of Corporate Affairs Gary Gray 
called on Ambassador twice during his February 7-10 visit to 
Mauritania.  Gray said his role is to "create a space for 
dialogue" but maintained that Woodside did nothing wrong in 
negotiating the amendments and that they are consistent with 
common industry practice.  Gray did not meet with any member 
of the Mauritanian government during his visit. 
 
¶2. (C) Gray informed the Ambassador that Woodside's overall 
exploration budget for next year will be $500 million, the 
largest ever for an Australian company.  However, most will 
be spent in the Gulf of Mexico, suggesting that far less than 
previously planned would go to Mauritania.  The political 
risk in Mauritania and "all things being equal" Woodside has 
shifted its focus towards the Gulf of Mexico.  In another 
indication of Woodside's intent, Gray noted that the IMF was 
estimating future earnings on "on a commercial decision not 
yet made." 
 
¶3. (C) Investor confidence is low and Woodside wants 
Mauritania to "embrace the arbitration process" allowing the 
Mauritanians a chance to "respect and follow the contract." 
According to Gray, it is a "matter of pride and saving face" 
for Woodside in the industry.  Arbitration could be a "happy 
medium" and although the arbitration process will continue 
long past the transitional period, the government's decision 
to declare a dispute will change the complexion of doing 
business in Mauritania forever. Woodside is planning on 
reaching out to the African Union on this issue. 
 
¶4. (C) During the arbitration process the contents of the 
contract will remain confidential.  Woodside is currently 
seeking political risk insurance through the World Bank and 
 
NOUAKCHOTT 00000170  002 OF 002 
 
 
will have to submit a copy of the contract but it will remain 
private.  However, the terms of the contract may surface 
during the trial of the former oil minister. 
 
¶5. (C) Woodside plans for CEO Don Voelte to come to 
Mauritania to discuss the issue of the amendments.  The 
Mauritanian government is being advised by attorneys from 
Freshfields, whom Gray characterized as "guns for hire," are 
giving "good advice if the end game is to get more money." 
Gray insists "if the end game is to participate in giving 
evidence against the former minister then Woodside cannot 
participate."  Woodside notes that the Mauritanians have 
shown "randomness because of their focus on the former oil 
minister rather than the add-ons to the contract." 
 
¶6. (C) According to Gray, the amendments were not created to 
take advantage of the Mauritanians but to clarify the 
ambiguity of the PSC.  Gray maintains that this dispute is 
"poisoning this relationship and there is no antidote." 
 
¶7. (C) Rumors of possible demonstrations against Woodside 
have begun to surface but no demonstrations have transpired 
as a result of this dispute.  The Mauritanian government held 
a press conference on February 13 in response to the criminal 
investigation of the former oil minister. It stated that he 
will be judged by a criminal court and could receive a 
maximum sentence of life in prison. 
 
¶8. (C) Embassy understands that oil production at Chinguetti 
field, which was supposed to begin on February 17, has been 
delayed for technical reasons. 
LeBaron