VZCZCXRO2083
RR RUEHBC RUEHDBU RUEHDE RUEHKUK RUEHLH RUEHMOS RUEHPA RUEHPW
DE RUEHNK #0377/01 0941905
ZNY CCCCC ZZH
R 041905Z APR 06
FM AMEMBASSY NOUAKCHOTT
TO RUEHC/SECSTATE WASHDC 5321
INFO RUEHZK/ECOWAS COLLECTIVE
RUCNISL/ISLAMIC COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0251
RUEHDO/AMEMBASSY DOHA 0080
RUEHBAD/AMCONSUL PERTH 0215
RUEAIIA/CIA WASHDC
RUEKDIA/DIA WASHDC
RUEHNO/USMISSION USNATO 0163
RUCPDOC/USDOC WASHDC

C O N F I D E N T I A L SECTION 01 OF 04 NOUAKCHOTT 000377 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF/W; AF/EPS (A. ADLER, J. HAENI); EB/ESC/IEC (K. 
RIOS); EB/CBA (D. WINSTEAD) 
COMMERCE FOR 4510/IEP/ANESA/OA/PMICHELINI; 
6930/ITA/MAS/MFG/OEEI/ABRICKMAN 
DAKAR FOR RSCO CGRIFFIN 
 
E.O. 12958: DECL: 04/04/2016 
TAGS: BBSR ECON EFIN EINV EPET MR
SUBJECT: MAURITANIA'S PRESIDENT AND PRIME MINISTER RELEASE 
STATEMENTS ON WOODSIDE DISPUTE 
 
REF: A. NOUAKCHOTT 00365 
 
     ¶B. NOUAKCHOTT 00330 
 
Classified By: AMBASSADOR JOSEPH LEBARON, REASON 1.4 (B), (D) 
 
-------------- 
(U) Key Points 
-------------- 
 
-- On March 30 Colonel Fal and Prime Minister Sidi Mohamed 
Ould Boubacar released separate statements regarding the 
resolution of the Woodside dispute. (informal translation of 
statements follow.) 
 
-- Woodside and its joint partners have given to the 
Mauritanians an up-front payment of 100 Million USD to settle 
its dispute. 
 
-- Under the new arrangements, Woodside and its partners will 
reduce the maximum cost of recovery rate of Chinguetti 
production wells from 60 percent to 50 percent when the oil 
price is 55 USD a barrel or higher. 
 
-- Woodside will no longer be exonerated from certain tax 
breaks that were arranged with the previous Mauritanian 
government. 
 
-- The Mauritanian government will receive a bigger cut of 
the profit from production when oil prices are at least 55 
USD a barrel. 
 
-- The new deal also states that Woodside and its partners 
will establish an operational center in the country's 
capital, Nouakchott 
 
-- Media reports state that Qatari Cheikh Mohamed Abdallahi 
Al Thani acted as a mediator between Woodside and the 
Mauritanian government during negotiations in Dubai. 
 
------------ 
(C) Comments 
------------ 
 
-- On the face of things it appears that the Mauritanians 
have come out on top but the concessions that Woodside have 
received are unknown. This is a large win for the Mauritanian 
people and government and is viewed as victory for 
safeguarding their oil legacy.  The perception of 
international investors towards Mauritania is still unknown. 
 
-- The Mauritanians are extremely happy with the resolution 
of the dispute, in particular with the 100 million USD 
payment.  This payment with bring an influx of money into the 
coffers of the Mauritanian government and will double their 
annual budget. 
 
-- Many in Mauritania are not happy with the release of the 
former Minister of Oil and Energy, Zeidane Ould H'meyda and 
view it as an undermining of the judicial system. 
End Key Points and Comments. 
 
--------------------------------------------- ------------- 
(U) Informal Translation of Speech by Colonel Ely Ould 
Mohamed Fal 
--------------------------------------------- -------------- 
 
My dear citizens, 
 
It is within the framework of the commitments of the Military 
Council for Justice and Democracy and the Transitional 
Government regarding total transparency in the management of 
issues of public interest that I address you today to talk 
about developments concerning a problem of major national 
interest. 
 
It concerns the dispute with the company Woodside over the 
so-called amendments to the Petroleum Production Sharing 
 
NOUAKCHOTT 00000377  002 OF 004 
 
 
Contracts, an issue which I have previously spoken about with 
you. 
 
I am pleased on this occasion to announce the favorable 
resolution of this crisis which has been settled through 
negotiations. 
 
Indeed, the parties have decided, through an agreement, to 
only take into consideration the initial contracts to which 
improvements serving the national interest had been 
introduced. 
 
It is a return to terms representing a fair and equitable 
partnership with Woodside. 
 
Beyond this important achievement which preserves the 
interests of the country, it also marks the reestablishment 
of Mauritanian law as well as the respect and the credibility 
of the State and its institutions, in conformity with the 
various legislation that regulate investment in the petroleum 
sector. 
 
I take this opportunity to congratulate the Mauritanian 
people for these important results. 
 
My dear citizens, 
 
It is also the place for me to voice my appreciation of the 
position of Woodside which has finally chosen to agree to 
respond to the legitimate expectations of our people. 
 
This allows us to inaugurate a new era of an equal and long 
term partnership with the company. 
 
I would also like, finally, to reiterate the commitment of 
Mauritania to its policy of encouraging investment and to 
assure investors of the best conditions and all the 
guarantees and legal protection possible. 
 
--------------------------------------------- --------- 
(U) Informal Translation of Prime Minister's Statement 
--------------------------------------------- --------- 
 
Two months ago, exactly the 5th of February, I informed you 
in this same place of the dispute that we had with Woodside 
concerning the four amendments of the PSCs of which we 
contested the legality and not being in line with the 
national interest. Today I have the pleasure to announce to 
you that this dispute has been resolved through negotiations. 
The government and Woodside have concluded an MOU which 
inaugurates a privileged, durable and equal partnership. 
 
According to the terms of the MOU, the disputed amendments 
are suspended and will be canceled and replaced by revised 
PSCs in order to take into account the several points 
contained in the MOU. The revisions will obviously be made 
according to the procedures set out under Mauritanian law. 
 
The cancellation of the amendments means, of course, that the 
clauses that I spoke about in front of all of you on February 
5, and which we described as contrary to the law and contrary 
to the national interest will be canceled. I remind you that 
the essential parts of these clauses concerned the drop in 
the production share of the state in the profit/ton in 
certain zones, the lightening of restrictions in terms of 
environmental protection, which implied the risk to the 
marine fauna and flora and the long term effect on our 
fishing resources. Also canceled are the reduction of tax of 
15 percent in certain zones as well as the monopoly of 
exploration and production for a number of years in certain 
areas because these areas will be sold. 
 
Canceled is also the exoneration from the imposition of 
capital gains tax on the sale of shares as well as the clause 
concerning the immediate recovery of the costs of appraisal 
wells. For abandonment costs, provisions will made and banked 
into a trust account for a period of three years before the 
 
NOUAKCHOTT 00000377  003 OF 004 
 
 
expected end of the life of the field. 
 
Canceled as well is the clause that gives the contractor the 
possibility to sole-source for the acquisition of goods and 
services in the context of petroleum operations which are 
recoverable costs and as such chargeable, in part, to 
Mauritania. 
 
Other canceled terms include the reduction of the obligation 
to carry out two exploration wells to one single well in 
certain zones as well the clause that centralizes the 
accounting in Australia and only makes allowance for 
non-electronic accounting in Nouakchott because the company 
will set up henceforth in Nouakchott an operations center to 
undertake all petroleum operations from the territory and, 
obviously, with an accounting system on the national 
territory. 
 
Also canceled is cost recovery on PSC B of the costs of 
Chinguetti 1 which was initially considered as a Zone A 
obligation. 
 
Also canceled was the clause that cancelled the ban on 
petroleum and gas sales to countries declared as hostile to 
Mauritania as well as the easing of the procedures of sale of 
shares from one affiliated company to another of a contractor. 
 
Also canceled are the clauses that allowed the contractor and 
its sub-contractors to use insurance coverage from foreign 
companies to the detriment of local insurance companies as 
well as the article which cancelled the requirement for the 
payment of the minimum obligations guarantee. 
 
These were the clauses about which I talked to you and which 
we said were unacceptable for Mauritania and which would be 
canceled. 
 
In order to respond to the concerns of Woodside regarding the 
stability of its on-going investments in the country, the 
extensions to the exploration periods for the joint venture 
of which it is the operator will be guaranteed. However, 
Woodside must fulfill its obligations relating to surface 
fees payments, in conformity to the law and the PSCs. 
 
In addition, Woodside will pay the State of Mauritania a 
bonus of 100 million dollars 14 days after the approval of 
the revised PSC.  This bonus is neither recoverable nor 
fiscally deductible. 
 
The Mauritanian Hydrocarbons Company (SMH) which is part of 
the consortium is exempted from participating in this bonus. 
 
The MOU provides new arrangements for the cost-oil ceiling 
for Chinguetti. Instead of 60 percent initially agreed, the 
ceiling will now be 50 per cent as long as the price of 
petrol is more or equal to 55 dollars per barrel. In the same 
spirit, the MOU provides that, on the Chinguetti production, 
when the market price is superior to that of 55 dollars a 
barrel, the Government will receive an additional profit of 5 
percent for the tranche of profit oil which corresponds to 
the part of the price more than this ceiling of 55 dollars 
per barrel. 
 
Concerning the protection of the environment, the Government 
and Woodside have agreed to collaborate together to insure 
the management of environmental risks according to the 
precaution principle and to put in place an annual fund of 
one million dollars for the environmental funded by Woodside, 
and during the period in which the operator is in production. 
 
Concerning the tax rate, in terms of corporation tax 
applicable to Woodside, the MOU returns to the initial PSCs 
and excludes the innovations that the amendments expected to 
introduce. 
 
The MOU provides as well that the present exclusive zone 
(EEA) for Chinguetti be redefined between the Government and 
 
NOUAKCHOTT 00000377  004 OF 004 
 
 
Woodside, in such a way that 50 per cent of this zone will be 
returned to the PSC. 
 
The MOU provides, in terms of abandonment and decommissioning 
of the site, which, as a general rule, deductible and 
recoverable, that these amounts be providing for and 
deposited into a trust account three years before the end of 
the life of the field. This allows the reconciliation of the 
concerns of the Government and of Woodside. 
 
Finally, the MOU provides that Woodside put in place an 
operations center in Nouakchott, that is to say a center that 
will be equipped with all the necessary means for the conduct 
and management of petroleum operations from the territory of 
Mauritania, including accounting, which could facilitate the 
collaboration between the two parties in a spirit of 
technology transfer. For the Government it is a way to ensure 
that the PSCs fulfill its basic objectives, which is the 
transfer of technology in the petroleum sector. 
 
When the Government raised the issue of the four amendments 
to the PSCs, its objectives were two-fold. On the one hand, 
it was necessary to avoid ratifying obvious infringements of 
Mauritanian laws regulating the oil and gas exploration and 
production activities, and on the other hand to refuse to put 
into effect to these clauses made in the interest of one 
single party. 
 
At the same time, we have always shown our full and total 
availability to find a solution with our partner through a 
friendly process, compatible with Mauritanian law and in 
conformity with the imperative of balance which must be the 
foundation of all durable and equal partnerships. 
 
Our concerns were met with goodwill on the part of Woodside 
who is our principal partner today in the petroleum industry. 
A page has thus been turned, and another opens. It will be 
one based in the respect of the law, of good intentions and 
transparency, which can only be the source of security of 
investments and the public interest. 
 
I must therefore before you thank Woodside for its 
availability it has expressed to work, in cooperation with 
the Mauritanian Government, toward a sustainable, transparent 
and mutually beneficial partnership. 
 
These are the essential elements of the MOU that the 
Government of Mauritania has just signed with Woodside. 
 
The Government has kept its promise to keep you informed 
immediately, as it has been its practice to keep you informed 
of the developments of the major large issues of the day. 
 
I remain available to take questions and provide 
clarifications. 
 
Thank you. 
 
End Informal translations. 
 
LeBaron 
LeBaron