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Reference ID	Created	Released	Classification	Origin
06LIBREVILLE391	2006-06-14 15:31	2011-08-30 01:44	CONFIDENTIAL	Embassy Libreville

VZCZCXYZ0023
PP RUEHWEB

DE RUEHLC #0391 1651531
ZNY CCCCC ZZH
P 141531Z JUN 06
FM AMEMBASSY LIBREVILLE
TO RUEHC/SECSTATE WASHDC PRIORITY 9125
INFO RUEHUJA/AMEMBASSY ABUJA PRIORITY 0349
RUEHLI/AMEMBASSY LISBON PRIORITY 0641
RUEHFR/AMEMBASSY PARIS PRIORITY 0803
RUEHYD/AMEMBASSY YAOUNDE PRIORITY 0669
RUEHOS/AMCONSUL LAGOS PRIORITY 0631
RUFGNOA/HQ USEUCOM VAIHINGEN GE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L LIBREVILLE 000391 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS DEPT OF ENERGY FOR CGAY 
PARIS AND LISBON FOR AFRICA WATCHERS 
 
E.O. 12958: DECL: 06/14/2016 
TAGS: EPET ECON EFIN ENRG GB TP
SUBJECT: GABON AND SAO TOME & PRINCIPE OIL UPDATE 
 
REF: A. LIBREVILLE 160 
 
     ¶B. 05 LIBREVILLE 1014 
 
Classified By: Michael Garcia, Economic Officer, for reasons 1.4B and D 
 
¶1.  Following is an update on the oil sector in Gabon and Sao 
Tome and Principe. 
 
----- 
Gabon 
----- 
 
¶2. (U) Production Down - According to the Ministry of Natural 
Resources, Gabon's oil production in the first quarter of 
2006 dropped by 8.4% over the previous year.  The Ministry 
stated that Gabon produced 3,329 million tons of oil from 
January to March 2005, while this period in 2006 saw 3,050 
million tons.  As a result, oil exports fell 4%, from 3,118 
million tons in 2005 to 2,994 million tons in 2006. 
 
¶3. (C) Refinery - In preparation for negotiations on an IMF 
3-year precautionary stand-by agreement, a member of the IMF 
delegation has been looking into contractual obligations in 
the oil sector's production sharing agreements.  One area of 
focus is the possible requirement for oil companies to supply 
the refinery (SOGARA) in kind at a 25% discount or by paying 
the monetary equivalent.  This requirement may be worth $50 
million to the government.  An IMF delegation is expected in 
Gabon at the end of June to negotiate the stand-by agreement 
and oil revenue/transparency will be an area of interest. 
 
¶4. (C) Hess Leaving, Mitsubishi Coming - Amerada Hess will 
close its office in Gabon by the end of June 2006.  As 
mentioned in ref A, Hess' local manager, Joe Ritchie, stated 
the company drilled 10 wells in the past few years and found 
no commercial prospects.  It is unclear if Hess will keep or 
sell its shares in the Gabonese blocks for which it is 
currently the operator.  While Amerada Hess is leaving, 
Mitsubishi Oil has opened an office in Libreville. 
 
¶5. (C) VAALCO Expanding - VAALCO's General Manager in Gabon, 
Michael Murphy, stated that the company hopes to bring 
on-line a platform in its Etami field by the end of 2006 and 
is currently negotiating an exploitation agreement with the 
government for its Mutamba field.  The addition of a platform 
in Etami is expected to bring VAALCO's total Gabon production 
to 30,000 b/d, which is what Marathon (currently the fourth 
largest producer in Gabon) produces.  While the big companies 
may not be interested in Gabon's oil industry, Murphy stated 
two reasons which will continue to attract smaller companies 
to Gabon: (1) high oil prices and (2) the government's 
welcoming of foreign oil firms. 
 
------------------------- 
Sao Tome & Principe (STP) 
------------------------- 
 
¶6. (C) Chevron - On May 26, Chevron issued a press release 
announcing that its first exploratory well in Block 1 of the 
Joint Development Zone (JDZ, shared by STP and Nigeria) found 
hydrocarbons, but it is premature to determine if this 
represents a commercial discovery.  According to Chevron's 
STP Country Manager, Tim Parsons, the well only encountered a 
few oil bearing zones and it will be a struggle to make it 
commercial.  Chevron will now integrate all the results of 
the well, then determine if there is enough justification to 
drill a second well, which would not be likely before 
mid-2007.  Parsons added that if Chevron decided to abandon 
Block 1 in the future, it would be economically unlikely that 
any other oil company (big or small) would come in. 
 
¶7. (C) ERHC - The rumor in STP (which appears to be supported 
by documents on ERHC's website) is that ERHC is being 
investigated by the SEC as a result of the STP Attorney 
General's examination of the second round bid of the JDZ (ref 
B).  At the same time, Parsons told EconOff that ERHC has 
already turned a profit on its holdings in the JDZ by selling 
some of its shares in Blocks 2, 3 and 4 to Addax and Sinopec. 
WALKLEY

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Viewing cable 06LIBREVILLE391, GABON AND SAO TOME & PRINCIPE OIL UPDATE