VZCZCXRO1606
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #2400/01 3081205
ZNR UUUUU ZZH
R 031205Z NOV 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 6251
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0864
RUEHRL/AMEMBASSY BERLIN 0648
RUEHBY/AMEMBASSY CANBERRA 0740
RUEHLO/AMEMBASSY LONDON 1616
RUEHMO/AMEMBASSY MOSCOW 0875
RUEHOT/AMEMBASSY OTTAWA 0706
RUEHFR/AMEMBASSY PARIS 1452

UNCLAS SECTION 01 OF 02 PRETORIA 002400 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, ISN, EEB/ESC AND CBA 
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT, L.PARKER 
DOC FOR ITA/DIEMOND 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EMIN EINV SENV SF
SUBJECT: U.S. OIL FIRM FOREST'S TRAVAILS 
 
REF: Pretoria 351 
 
This message is sensitive but unclassified, not for Internet 
distribution. 
 
¶1.  (SBU) SUMMARY: U.S. firm Forest Oil Company's local presence - 
Forest Exploration International - is struggling to move its 
production license application out of a three-year regulatory limbo. 
 Forest is frustrated with bureaucratic slowness and/or 
incompetence.  Forest believes that it can produce significant 
off-shore gas off the Western Cape, which could help resolve South 
Africa's power crisis.  Forest is considering posting an official to 
Cape Town to establish its local presence and promote its project. 
End Summary. 
 
------------------------------ 
Forest Sells Big Plans for Gas 
------------------------------ 
 
¶2.  (SBU) Forest Exploration International Director John Langhus 
told Charge d'Affaires and Acting Economic Counselor in an October 
14 meeting that Forest was disappointed with slow progress on its 
application for production licenses on the offshore Ibhubesi gas 
field, off the Western Cape in South Africa.  Langhus said Forest 
had been mired in application regulatory limbo for three years and 
has had a completed application for a "new order" (under current 
law) production license for two blocks stuck with the state 
Petroleum Association of South Africa (PASA) for over one year. 
Langhus criticized PASA as an obstacle, noting that their 
application still would still need to proceed to the Department of 
Minerals and Energy (DME).  Langhus said that PASA was dealing with 
only five oil/gas applications, while the DME was dealing with 
hundreds of mineral applications with far greater results.  He 
suggested that bureaucratic slowness at PASA was caused by 
incompetence or bad faith. 
 
¶3.  (SBU) Langhus said Forest was considering a $2 billion, 20-year 
investment in drilling and development, including 99 wells and four 
high-tech production platforms.  He said Forest had production and 
exploration license applications for two adjacent off-shore blocks 
lodged with PASA.  Langus said Forest could land gas 36-42 months 
after the granting of a production license by the SAG, aiming at 225 
million cubic feet gas per day.  Langhus was frustrated that gas 
regulators did not appreciate the significance of new gas 
development to help resolve South Africa's power crisis.  He said 
Forest was considering a range of options from gas-fired independent 
power producers to increasingly ambitious gas pipelines to Saldanha, 
Cape Town, Mossel Bay, and Coega.  Langhus noted that gas-fired 
plants could be developed rather quickly and could replace expensive 
use of kerosene and diesel at the Atlantis plant north of Cape Town. 
 He admitted that Forest should have done a better job in explaining 
and promoting its plans with local and national government officials 
and to that effect should have had a Forest official placed on the 
ground.  Langhus said he was considering posting himself to Cape 
Town, depending on results with the SAG.  If he was NOT successful 
in obtaining progress in securing the production license during this 
visit, he would come to Cape Town.  If he was successful, he would 
Qvisit, he would come to Cape Town.  If he was successful, he would 
not come. 
 
--------------------------- 
Open For Business - or Not? 
--------------------------- 
 
¶4.  (SBU) Petroleum Agency SA (PASA) reports directly to the 
Minister of Minerals and Energy and is the official agency 
responsible for the promotion and regulation of South Africa's 
petroleum and natural gas (including coal-bed methane) resources. 
PASA issues exploration and production licenses with the Minister's 
approval, regulates and monitors both off-shore and on-shore 
exploration and production activities, and is the custodian of the 
national exploration and production database for petroleum 
resources.  According to an energy consultant, if PASA recommends 
the granting of a license, the Minister is obliged to rubber-stamp 
its approval within a certain time limit (in theory).  This does not 
happen in practice, but companies have so far been reluctant to 
aggressively push or to take the Minister to court. 
 
PRETORIA 00002400  002 OF 002 
 
 
 
¶5. (SBU) COMMENT: Mission has been in regular contact with Forest 
Oil Corporation and other foreign oil and gas companies over the 
years and has heard the frustrating anti-business or "not open for 
business" stance of PASA and DME.  Forest's desire to jump-start gas 
production and utilization would be a good news story in 
hydrocarbon-poor South Africa, especially as the project could help 
resolve the power crisis.  Forest has established a BEE partner, 
including well-placed businessman Tokyo Sexwale, and uses mining 
expert Peter Leon as their attorney.  It is remarkable that even 
with these high-powered connections, their production and 
exploration licenses are still stuck.  Forest admits that it needs 
to be present on the ground to better establish its presence and 
promote its project. 
 
¶6.  (SBU) COMMENT CONTINUED: Forest's experience contrasts 
dramatically with Westinghouse which established a local office, 
acquired a local company, joined the American Chamber, and assumed a 
position on its board.  Sixteen months later, Westinghouse has 
secured a major presence in South Africa and is on the verge of 
winning a multi-billion dollar contract.  The lesson learned is that 
U.S. companies cannot do serious business in South Africa without a 
substantial local presence. 
 
LALIME