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OO RUEHWEB

DE RUEHQT #2087 2301942
ZNR UUUUU ZZH
O 181942Z AUG 06
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5074
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 0172
RUEHBO/AMEMBASSY BOGOTA PRIORITY 5887
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RUEHLP/AMEMBASSY LA PAZ AUG 0021
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RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 002087 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG
SUBJECT: SUBJECT:  DEMARCHE REQUEST RE POTENTIAL INDONESIAN 
INTEREST IN OCCIDENTAL PETROLEUM,S FORMER BLOCK 15 IN 
ECUADOR 
 
REF: STATE 81527 
 
¶1. (U) This is an action request; see para 7. 
 
¶2. (SBU) Summary:  Press reports indicate Indonesia's 
state-run oil company Pertamina is interested in running 
Occidental Petroleum's (Oxy)  former Block 15 in Ecuador 
under an Energy Cooperation MOU signed between the two 
countries in July.  French, Indonesian, and Ecuadorian papers 
ran the story.  An Ecuadorian industry contact believes the 
story was promoted by the GOE to soothe Indonesian feelings 
after state-run companies were shut out of a recent sale of 
Petroecuador's crude, and that Pertamina does not have the 
funds for such a large investment.  Nevertheless, Embassy 
Quito recommends that Washington transmit reftel to Embassy 
Jakarta in order to advise the Government of Indonesia of the 
risks of becoming involved in Block 15.  End Summary. 
 
¶3. (U) Background:  In May, the Government of Ecuador 
declared Oxy's operations contract null, and state oil 
company Petroecuador took over Oxy's assets, operations, and 
revenue.  Oxy believes this action violated the U.S.-Ecuador 
Bilateral Investment Treaty (BIT).  The case is currently 
pending international arbitration. 
 
¶4. (SBU) Reftel noted that Petroecuador does not have the 
level of expertise to operate the sophisticated technology 
that Oxy installed to run Block 15, and may seek assistance 
from third-party state oil companies.  It instructed a number 
of embassies (although not Jakarta) to demarche host 
governments on the issue and warned of the pitfalls of 
foreign parastatal involvement in Block 15.  To date, no 
foreign parastatal has agreed to help operate Block 15. 
 
¶5. (U) Foreign Minister of Ecuador Carrion visited Indonesia 
in July and signed an energy cooperation MOU.  He is quoted 
in the press as saying that "Pertamina has reaffirmed its 
interest in developing Oxy's Block 15 together with 
Petroecuador."  The MOU reportedly calls for cooperation on 
the drilling, production, and refinement of crude oil, but we 
understand that it does not specifically address Block 15. 
 
¶6. (SBU) Comment:  Indications from the head of the 
hydrocarbons association in Ecuador (and our own perceptions) 
are that Pertamina is unlikely to become involved in Block 
¶15.  Per the hydrocarbons expert, Pertamina does not have the 
resources for such a large investment, particularly for one 
so far from Indonesia.  He believes the GOE statement was 
made to soothe Indonesian feelings after Petroecuador's 
recent sale of crude oil went to private rather than 
state-run firms (Ecuador claims to favor state-run oil 
companies and has signed cooperation agreements with 
several).  Although Embassy Quito believes Indonesian 
development of Block 15 is unlikely, given the GOE statement, 
we recommend that Embassy Jakarta pass the reftel message to 
the Indonesian government . 
 
¶7. (SBU) Action Request:  We request that Washington instruct 
Embassy Jakarta to demarche the Indonesian government using 
the talking points from Reftel para 6.  End Action Request. 
JEWELL