VZCZCXRO8057
PP RUEHMA RUEHPA
DE RUEHDK #2460/01 2860615
ZNR UUUUU ZZH
P 130615Z OCT 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6550
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/USDOC WASHDC
RUEHLMC/MCC WASHDC
RUEHBJ/AMEMBASSY BEIJING 0093
RUEHLC/AMEMBASSY LIBREVILLE 0909
RUEHNR/AMEMBASSY NAIROBI 1219
RUEHRB/AMEMBASSY RABAT 0788
RUEHTRO/AMEMBASSY TRIPOLI
RUEHYD/AMEMBASSY YAOUNDE 0270
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 002460 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EB/ESC/IEC, EB/IFD/OIA, AF/EPS AND AF/W 
AID/W FOR AFR/WA AND AFR/SD 
TREASURY FOR OIASA/IDB 
DOE FOR OFFICE OF POLICY AND INTERNATIONAL AFFAIRS 
USDOC FOR 4510/OA/PMICHELINI, AROBINSON-MORGAN/KBOYD 
USDOC FOR 3131/CS/ANESA/OIO/GLOOSE/GLITMAN/MSTAUNTON 
 
E.O. 12958: N/A 
TAGS: ENRG EINV ECON EPET KMCA CH IR LY MO SG
SUBJECT: WESTERN OIL COMPANIES REDUCE HOLDINGS IN SENEGAL AS OTHER 
WESTERN COMPANIES GO UNPAID 
 
REF: A. YAOUNDE 1566 
 
¶B. DAKAR 2364 (NOTAL) 
¶C. DAKAR 1746 (NOTAL) AND PREVIOUS 
 
DAKAR 00002460  001.2 OF 002 
 
 
SUMMARY 
------- 
¶1.  (SBU) Citing poor returns on investments, Exxon-Mobil officials 
have announced publicly the sale of its 300 service stations in 
Senegal, Cote d'Ivoire, Gabon, Cameroon, Kenya, and the island of 
Reunion to the Libyan firm Tamoil.  At the same time, Royal Dutch 
Shell is quietly selling off the remainder of its shares in 
Senegal's petroleum refinery, SAR, to government parastatal 
Petrosen.  END SUMMARY. 
 
¶2.  (U) Exxon-Mobil (EM) officials met with EmbOffs to share news of 
its plans to sell off its downstream service stations in six African 
locations to Libyan company Tamoil.  Citing a poor return on 
investment, EM is selling off its downstream operations in Senegal, 
Cote d'Ivoire, Gabon, Cameroon, Kenya, and the island of Reunion. 
While each country's requirements for the transfer of ownership 
differ, EM's Director of Finance for Africa expects Senegal's 
transfer to be the quickest of all six to implement.  According to 
EM officials, once Tamoil declares its intention to buy EM 
operations the transaction can be finalized within 10 days of the 
declaration.  EM does not expect employees to be affected by the 
transfer in ownership, and Tamoil will have the rights to retain the 
Exxon-Mobil name for up to one year. 
 
¶3.  (U) While EM has pulled out of downstream operations, officials 
maintain that the upstream oil exploration market is lucrative, and 
they intend to double their upstream investment in Africa by 2010. 
(NOTE: EM will continue to maintain its service stations in Nigeria, 
Morocco, Tunisia and Egypt.  END NOTE.) 
 
EXXON MOBIL THANKS EMBASSY TEAM 
------------------------------- 
¶4.  (U) Following months of intensive advocacy in 2005 and 2006 by 
senior mission officers, last week EM finally received USD 1.29 
million in GOS tax credits owed as a result of changes in Senegal's 
tax codes that caused Exxon-Mobil to pay taxes to both SAR and 
Customs on the same product, from 1999 to 2002.  Over the past year, 
Exxon-Mobil faced the possible write-off of USD 2.8 million in tax 
overpayments if Senegal did not officially acknowledge the error and 
take steps to reimburse Exxon Mobil.  The Ambassadors raised the 
issue multiple times with the Prime Minister and the Minister of 
Finance.  EM officials credit the Minister of Finance with being 
proactive in seeking a resolution to the problem as a result of 
these meetings.  EM expects to receive another credit in the amount 
of USD 290,000 before the end of the month.  The remaining USD 
800,000 is still under review. 
 
SHELL SELLING SHARES IN SAR 
--------------------------- 
¶5.  (SBU) Energy officials informed EmbOff that Petrosen (the 
state-owned oil company) is finalizing negotiations with Shell to 
buy its remaining shares in SAR.  This move would give the GOS a 
68.2 percent majority stake in the oil refinery.  As the GOS has 
limited experience in the management of a refinery, it is expected 
that it will contract with France's Total Elf to run operations.  As 
of October 11, SAR remains closed. 
 
EMERGENCY FUEL FUND 
------------------- 
¶6.  (SBU) The creation last month of the Emergency Fuel Fund (EFF) 
came in response to the country's severe energy crisis (Ref B). 
According to a draft government decree, the Fund aims to ensure a 
steady supply of fuel for the country, while officials grapple with 
the way forward to liberalize fuel prices.  Margins obtained from 
lowered prices on the international oil market will replenish the 
Fund and savings will not be passed on to the consumer.  (NOTE: 
Government officials have conceded that they might have to lower 
prices slightly at the pump to appease disgruntled consumer groups. 
END NOTE.)  According to the draft government decree, additional 
 
DAKAR 00002460  002.2 OF 002 
 
 
resources will come from friendly countries and development 
partners, reportedly including Morocco, Libya, Nigeria and Iran, and 
also from the sale of petroleum products given to Senegal at 
preferential rates by these petroleum supplying countries. 
 
¶7.  (SBU) The draft decree is short on specifics, but it outlines 
the use of the Fund to offset commercial losses linked to the 
importation of petroleum products, to support costs of refining 
activities, and to support costs related to the declassification of 
various petroleum products. 
 
¶8.  (SBU) The Fund's management committee, according to the draft 
decree will include a representative of the Ministry of Energy, two 
representatives of the Ministry of Finance and two from the Ministry 
of Commerce, as well as representatives from SAR and licensed fuel 
importers.  The Fund's manager will be appointed based on a separate 
decree from the Ministry of Finance. 
 
COMMENT 
------- 
¶9.  (SBU) It is clear that Senegal will see a couple of new entrants 
(Tamoil and oil suppliers from Iran and other "friends of Senegal") 
in its energy sector over the next several months.  Perhaps they 
will be able to help Senegal muddle through its energy crisis.  With 
power shortages continuing unabated during the peak demand season, 
SAR inoperable, and U.S. IPP GTi mothballed due to lack of full 
payment and a reliable fuel supply stemming from the delayed 
payments by power utility Senelec, it is highly likely that 
President Wade's proclamation to end power outages by October 15, 
2006 will prove to be empty. 
 
¶10.  (SBU) At the same time, we remain concerned about an overall 
lack of transparency in the management of the energy sector by the 
GOS and the electricity parastatal/monopoly SENELEC.  The draft 
decree on the EFF does not provide adequate information on oversight 
and accountability for such a potentially large fund.  Further, 
recent GOS steps, including the reacquisition of shares of SAR, are 
a clear retreat from the Wade administration's commitment (via a 
2003 policy paper presented to major donors) to take steps to 
enhance private-sector participation in Senegal's long-troubled 
energy sector.  As a result, the World Bank, reportedly in response 
to on-going management and policy concerns related to SENELEC, has 
stopped funding energy-related projects in Senegal.  END COMMENT. 
 
Jackson