VZCZCXYZ0000
RR RUEHWEB

DE RUEHNJ #0611/01 1201315
ZNR UUUUU ZZH (508)
R 301315Z APR 06
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC 3643
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHDK/AMEMBASSY DAKAR 1041
RUEHBP/AMEMBASSY BAMAKO 0608
RUEHNM/AMEMBASSY NIAMEY 2643
RUEHYD/AMEMBASSY YAOUNDE 1133
RUEHUJA/AMEMBASSY ABUJA 1095
RUEHKL/AMEMBASSY KUALA LUMPUR 0021
RUEHLO/AMEMBASSY LONDON 1344
RUEHFR/AMEMBASSY PARIS 1733

UNCLAS NDJAMENA 000611 
 
SIPDIS 
 
DEPARTMENT FOR AF, EB, LONDON AND PARIS FOR AFRICA WATCHERS, 
TREASURY FOR OTA, ENERGY FOR CAROLYN GAY AND GOERGE PEARSON 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ENRG EPET ECON EINV CD
SUBJECT: ESSO PLEASED WITH CHAD-WORLD BANK DECISION, BUT NOT 
OUT OF THE WOODS YET 
 
REF: NDJAMENA 142 and previous 
 
¶1.  (SBU) SUMMARY: Esso is pleased with the interim 
agreement reached between the World Bank and the GOC, and 
received formal word from the Government that it was 
rescinding its request for Esso to halt production. 
Nevertheless, it admits that the possibility of another 
threat from the GOC to halt production exists if long-term 
issues surrounding the Revenue Management Process are not 
resolved.  Other members of the Consortium, Chevron and 
Petronas, hope to resolve a tax dispute with the GOC in the 
coming days. 
 
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GOC RETRACTS THREAT OF STOP ORDER 
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¶2.  (SBU) On April 27, during a meeting with the Ambassador 
and E/C officer, Esso Country Manager Ron Royal and Miles 
Shaw expressed their satisfaction that the interim deal that 
was reached between the World Bank and GOC on April 26. 
According to Royal, the deal appeared to entail five 
concrete steps: 1) the ratification of the 2006 budget by 
the National Assembly 2) the release of the oil royalties 
held by the Consortium back into the Citibank escrow account 
3) the commitment by the GOC to utilize seventy percent of 
the oil revenues for poverty alleviation and thirty percent 
for the public treasury 4) the immediate lifting of the 
suspension on the USD 124 million in social loans and 5) the 
gradual release of oil royalties from the escrow account. 
 
¶3.  (SBU) Royal noted that the royalty payments falling 
under this framework would only include the royalties held 
by the Consortium following the January 9 freezing of the 
escrow account, which amounted to USD 125 million.  Future 
royalty payments would follow the previous practice of being 
deposited directly into the escrow account.  He added that 
the Consortium would still need to receive a letter from the 
Ministry of Petroleum rescinding its formal request for Esso 
to halt production.  On April 28, Embassy received word from 
Esso that the letter had been sent from Minister of 
Petroleum Mahamat Hassan to Royal, stating that in light of 
the recent accord between the World Bank and GOC, the 
Ministry would remove its demand for Esso to halt its oil 
production. 
 
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APPRECIATIVE OF US INVOLVEMENT, MAYBE MORE CONTACT WITH 
FRENCH? 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶4.  (SBU) On April 25, during a meeting with DAS Yammamoto 
and the Ambassador, Royal stated that he and Exxon-Mobil 
headquarters were extremely appreciative of USG involvement 
to ask the GOC to re-consider its demand to halt the 
Consortium's oil operations.  He added that Chadian 
Ambassador Mahmoud Bechir appeared to play an important role 
in pushing the GOC to reach an agreement, and speculated 
that the U.S. and Exxon's dialogue with Bechir may have 
persuaded the Ambassador to convince President Deby to 
accept the Bank's proposal. 
 
¶5.  (SBU) Royal noted to Yammamato and the Ambassador that 
he had met with French Ambassador Jean-Pierre Bercot last 
week to discuss concerns of a possible shutdown of oil 
production in the context of the current instability the 
country faced.  Royal said that Bercot was interested in 
seeking out more dialogue with the Consortium.  Royal 
speculated that the Bercot probably understood the 
importance of the revenue management process and the 
devastating impact that a shutdown would have on the 
country.  After all, while the French had no economic 
interests associated with the oil operations in Southern 
Chad, it understood the importance of the operations for the 
country's economic and social stability.  He believed that 
Bercot, given his close relationship with President Deby, 
could probably be an ally in future disputes between the GOC 
and the Consortium, particularly those related to the 
 
Revenue Management Process. 
 
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A FUTURE COMPREHENSIVE AGREEMENT STILL NEEDED 
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¶6.  (SBU) While Esso is temporarily out of the woods, Royal 
admitted to the Ambassador on April 27 that the deal between 
the Bank and GOC was an interim deal, and should be followed 
by negotiations between the parties to resolve long-term 
issues concerning public finance management and the use of 
indirect revenues.  He added that he hoped the World Bank 
would send in technical assistance to assist the Chadian 
Public Finance System, and that President Deby would commit 
to significant reforms and spending on poverty reduction. 
 
- - - - - - - - - - - - - - - - - - - 
TAX ISSUES WITH CHEVRON AND PETRONAS 
- - - - - - - - - - - - - - - - - - - 
 
¶7.  (SBU) Royal raised a tax dispute that Chevron currently 
faced with the GOC.  The GOC asserted that Chevron and 
Petronas were required to pay a certain amount of income 
taxes based on the revenue earned by the Consortium last 
year.  Royal explained that unlike Exxon-Mobil, neither 
Chevron nor Petronas established an amortization schedule of 
its costs in its agreement with the GOC.  As there was no 
consistent rate of depreciation identified in the agreement, 
Chevron and Petronas used a faster depreciation to ensure a 
minimal tax payment.  While the two Consortium members have 
asserted that the agreement with the GOC permits them to 
take such a measure, Government officials claim that such a 
measure does not conform to the spirit of the agreement. 
GOC officials fee that a loophole is preventing them from 
receiving tax revenues that Chad deserves, as the Consortium 
as a whole was accruing profits from the Doba project. 
 
¶8.  (SBU) Royal said that Minister Hassan had stated that if 
Chevron and Petronas did not fulfill their tax payment 
obligations, the GOC would use whatever means possible to 
have the Consortium members replaced.  Ambassador Wall 
indicated that he received a letter from Chevron General 
Manager Cheryl Rock asking the U.S. Embassy to assist 
directly in facilitating a fair review of the tax process. 
Royal thought it better for now for Chevron and Petronas to 
communicate with the Ministry of Finance (who is responsible 
for collecting tax payments) to determine if a resolution 
can be reached on tax payments.  The Ambassador noted that 
if necessary, he would be happy to facilitate a resolution. 
 
- - - - 
COMMENT 
- - - - 
 
¶9.  (SBU) While the Consortium is able to maintain its 
operations for the time being, it may face similar threats 
in the future if dialogue between the GOC and the World Bank 
does not continue.  We will continue to monitor developments 
in the tax dispute between Chevron and Petronas and the GOC. 
 
WALL