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DE RUEHNK #0111/01 0371722
ZNY CCCCC ZZH
R 061722Z FEB 06
FM AMEMBASSY NOUAKCHOTT
TO RUEHC/SECSTATE WASHDC 5134
INFO RUEHZK/ECOWAS COLLECTIVE
RUCNISL/ISLAMIC COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0208
RUEHBAD/AMCONSUL PERTH 0172
RUEAIIA/CIA WASHDC
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RUEHNO/USMISSION USNATO 0120
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C O N F I D E N T I A L SECTION 01 OF 02 NOUAKCHOTT 000111 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF/W; AF/EPS (A. ADLER, J. HAENI) 
EB/ESC/IEC (K. RIOS) 
EB/CBA (D. WINSTEAD) 
4510/IEP/ANESA/OA/PMICHELINI 
6930/ITA/MAS/MFG/OEEI/ABRICKMAN 
DAKAR FOR RSCO CGRIFFIN 
 
E.O. 12958: DECL: 02/05/2016 
TAGS: BBSR EINV EPET ECON EFIN MR
SUBJECT: OIL DISPUTE PROCESS BEGINS; FIRST OIL STARTS FEB. 
17 
 
REF: A. NOUAKCHOTT 0067 
     ¶B. FBIS GMP20060205710051 
 
Classified By: Classified by Amb. Joseph LeBaron, Reason 1.4 (b),(d) 
 
--------------- 
(C)  KEY POINTS 
--------------- 
 
-- Australian Woodside Energy Ltd. announced February 3 that 
Mauritania has opened a formal dispute resolution process 
over four amendments to the production sharing contracts 
associated with the offshore Chinquetti field. 
 
-- Junta leader Fal told Mauritanians in a national address 
last night that the amendments cut the state's oil revenue 
share, lowered taxes, and scrapped bank guarantees that were 
in the initial contract.  Mauritanians appear to be rallying 
behind Fal, approving strongly of his position. 
 
-- Meanwhile, the former minister of oil remains in prison on 
corruption and fraud charges.  At the same time, Woodside 
says it is on schedule for the production of first oil on 
February 17. 
 
------------ 
(C) COMMENTS 
------------ 
 
-- Both sides are keeping the exact details of this dispute 
close to their vests, even as both sides appear to see the 
Embassy as an influential player in the intensifying dispute. 
 
-- While not judging the merits of the Mauritanian complaint, 
it appears to us that the Mauritanians have started down a 
path that could lead to a delay in the production of first 
oil. 
 
-- The steep rise in oil prices unquestionably is a major 
factor in the dispute.  The Prime Minister told Ambassador 
that the Production Sharing Contract and amendments, as 
written, do not equitably share the increased profits brought 
on by the steep rise in oil prices.  Because they don't, the 
Mauritanian government could never justify to the Mauritanian 
people the current agreements with Woodside. 
 
End Key Points and Comments. 
 
¶1.  (U) On February 3, Woodside published a "Notification of 
Dispute" to the Australian stock market stating that Woodside 
is continuing discussions to resolve the dispute.  Post 
understands that the PSCs allow for a 90-day "cooling off" 
period before the dispute goes to arbitration. 
 
¶2.  (U) In a public address on the dispute on February 5, 
Colonel Fal said that the amendments were illegal and favored 
Woodside, stating they were "detrimental to the Mauritanian 
state" as they "harmed national interests. (Ref B)" 
 
¶3.  (C) Prime Minister Sidi Mohamed Ould Boubacar called in 
Ambassador February 3 to explain the Mauritanian position: 
 
--  The basis of the Mauritanian dispute is that the 
Production Sharing Contract and amendments, as written, do 
not equitably share the increased profits brought on by the 
steep rise in oil prices. 
 
--  The Mauritanians are concerned that Woodside's 
notification suggested that the dispute will likely go to 
arbitration.  The Mauritanians want to settle before the 
dispute goes to arbitration in Paris. 
 
--  The Mauritanian government wants to assure Woodside and 
other investors that the government intends to abide by law 
and ethical practices in its dealings, so investors should 
have nothing to fear. 
 
 
NOUAKCHOTT 00000111  002 OF 002 
 
 
-- Mauritania wants to work with Woodside on a compromise 
without further agitating the public or the markets. 
 
¶4. (C) The Prime Minister also lamented that Woodside sent 
only a technical level mission to negotiate.  He suspected 
that the level was not sufficiently high enough to make 
decisions. (Note:  The Embassy has since learned that 
Woodside Senior Corporate Affairs Director Gary Gray will be 
visiting Mauritania on February 7.  End Note) 
 
¶5. (C) Woodside's Mauritania General Manager John Ozturgut 
told Ambassador on January 30 that the Mauritanian 
government's position continues to be for Woodside to declare 
the four amendments "null and void" before negotiations, 
something Woodside refuses to agree to. 
 
¶6. (C) The Woodside team met with the Prime Minister, 
Minister of Energy and Petrol, Minister of Finance and the 
Central Bank Governor.  According to Ozturgut, also present 
on the Mauritanian side was the powerful businessman Mohamed 
Hmayen Bouamatou and his guest, and a French anti-corruption 
activist "Anton Guidon".  Ozturgut reported that during the 
meeting the Minister of Energy and Petrol appeared to be 
"anxious and agitated."  The Mauritanians told Woodside they 
wanted to resolve the dispute rapidly.  "We have a man in 
jail because of these amendments," to which Woodside 
responded "this is a criminal investigation and has nothing 
to do with us." 
 
¶7.  (C) Ozturgut remains suspicious that the Mauritanian's 
demand to declare the amendments "null and void" is a ruse to 
later cancel the entire PSC.  He stated that the amendments 
were passed as a law by Parliament and the government does 
not have the authority to cancel any law without the consent 
of a court and Parliament.  Ozturgut was confident that 
arbitration court would side with Woodside on the legality of 
the documents. 
 
¶8.  Ozturgut postulates that Bouamatou and Chief of the 
Presidential Guard Force and junta member Col. Mohamed Abdel 
Aziz are behind the effort to have the amendments cancelled. 
He is unable to determine what role Fal has in all of this. 
 
¶9. (C) Prior to the arrival of the team, the Prime Minister 
spoke with Woodside's CEO Don Voelte.  Ozturgut said Fal 
refused to talk to Voelte over this matter, whereas the Prime 
Minister said that Fal was receiving a delegation at the time 
and was unavailable.  Boubacar asked Voelte to come himself, 
but instead sent a lower level mission.  Ozturgut suggested 
that the team in fact did not have the power to close a deal, 
only to discuss details of the contract, something the 
Mauritanians were not interested in doing. 
 
¶10.  (C) Post recently received a letter from the London 
office of the New York based law firm LeBoeuf, Lamb, Greene 
and MacRae seeking Embassy assistance in recovering 
$192,187.12 they claim is owed to them by the Mauritanian 
government.  The London-based firm (with offices in New York) 
had assisted in the financing agreement between Sterling 
Energy and Mauritania's state oil company Groupe Projet 
Chinguetti (GPC).  This letter states that Sterling gave the 
Mauritanian government a 15.5 million USD signing bonus and a 
letter of credit in the amount of $130 million USD. 
 
¶11.  (C) Ozturgut confirmed that Woodside plans to go ahead 
with first oil on schedule, even though they have not 
received all the proper approvals from the ministry. 
Woodside is documenting every unanswered request so as "to 
leave a legal paper trail."  Dana Petroleum, a member of the 
consortium, has encountered the same problems.  Ozturgut is 
not sure if these delays are willful as the arrest of the 
former oil minister has had a chilling effect throughout the 
ministry.  "No one wants to take any action and find 
themselves arrested by the next government." 
LeBaron