VZCZCXRO1517
OO RUEHBC RUEHBZ RUEHDE RUEHDH RUEHDU RUEHGI RUEHJO RUEHKUK RUEHMA
RUEHMR RUEHPA RUEHRN RUEHROV RUEHTRO
DE RUEHNJ #0338/01 2250954
ZNR UUUUU ZZH
O 130954Z AUG 09
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7160
RUCNFUR/DARFUR COLLECTIVE PRIORITY
RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RHMFISS/HQ USAFRICOM STUTTGART GE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 NDJAMENA 000338 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EPET EINV PGOV PREL FR CD
SUBJECT: CHAD AND ESSO/CHAD:  PROTECTING A SIGNIFICANT AMERICAN 
INVESTMENT AND CHAD'S PUBLIC FINANCES 
 
REF: NDJAMENA 194 
 
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SUMMARY 
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¶1.  (SBU) OVER THE PAST TWO WEEKS, AMBASSADOR NIGRO WORKED WITH 
ESSO/CHAD HEAD STEPHANE DE MAHIEU IN WHAT THEY BELIEVE WAS A 
SUCCESSFUL EFFORT TO PROTECT THE MOSTLY U.S.-OWNED PETROLEUM 
PRODUCTION AND PIPELINE PROJECT FROM UNCOORDINATED GOC ACTIONS AND 
AT THE SAME TIME, TO PROTECT THE GOC FROM ITSELF.  JOINT DEMARCHES 
TO THE PRIME MINISTER AND SECRETARY-GENERAL OF THE PRESIDENCY CAUSED 
THE GOC TO SHELVE PLANS TO IMPLEMENT CHANGES TO ITS FOREIGN WORK 
PERMIT POLICY THAT WOULD HAVE RESULTED IN EXODUS OF ESSO'S EXPERT 
FOREIGN STAFF AND RAPID REDUCTION OF OIL PRODUCTION, STARTING AS 
EARLY AS SEPTEMBER. 
 
¶2.  (SBU) THE CHAD-CAMEROON PETROLEUM PIPELINE PROJECT IS THE 
BIGGEST SINGLE AMERICAN PRIVATE-INDUSTRY INVESTMENT IN SUBSAHARAN 
AFRICA AND THE U.S. ECONOMY BENEFITS TO THE TUNE OF MORE THAN 1,000 
AMERICAN JOBS CREATED, 83 MILLION USD IN PERSONAL INCOME GENERATED, 
AND OVER TWO BILLION USD OF PROFIT RETURNED TO U.S. SHAREHOLDERS 
THROUGH DIVIDENDS.  CHAD DEPENDS ON THE REVENUES IT GETS FROM THE 
PROJECT FOR 75 PERCENT OF ITS PUBLIC REVENUES.  REDUCED PRODUCTION 
IN THE SHORT TERM AND REDUCTION OR ELIMINATION OF FUTURE PLANNED 
INVESTMENT BY THE CONSORTIUM IN THE LONGER TERM WOULD BE DEVASTATING 
TO CHAD'S FINANCES AND HAVE A NEGATIVE IMPACT ON U.S. INDUSTRY.  THE 
EQUITIES OF BOTH THE U.S. AND CHAD ARE PROTECTED BY CONTINUED CLOSE 
COLLABORATION BETWEEN EXXON-MOBIL AND THE GOC.  END SUMMARY. 
 
¶3.  (SBU) DE MAHIEU UPDATED AMBASSADOR JULY 31 ON AN ISSUE THAT HAD 
THE POTENTIAL TO REDUCE PETROLEUM PRODUCTION WITHIN A SHORT TIME. 
THE MINISTRY OF LABOR HAD BEEN PUSHING A SCHEME TO (A) INCREASE THE 
NUMBER OF CHADIAN PROFESSIONALS IN THE EMPLOY OF FOREIGN FIRMS 
OPERATING IN CHAD AND (B) CHARGE A FEE EQUAL TO A FOREIGN EMPLOYEE'S 
MONTHLY SALARY INSTEAD OF A FIXED WORK PERMIT CHARGE EQUAL FOR ALL 
FOREIGN EMPLOYEES, REGARDLESS OF SALARY. 
 
¶4.  (SBU) ESSO/CHAD WAS SUCCESSFUL IN SHOWING THE GOC, INCLUDING THE 
LABOR MINISTRY, THAT INCREASING THE NUMBER OF CHADIAN PROFESSIONALS 
IN THE EMPLOY OF ESSO IN CHAD WOULD (A) BE IMPOSSIBLE OR (B) RESULT 
IN A "BRAIN DRAIN" FROM CRITICAL CHADIAN GOVERNMENT CADRES TO 
ESSO/CHAD, WHICH THE GOC ACCEPTED AS UNDESIRABLE. 
 
¶5.  (SBU) THE SECOND ISSUE, THE LABOR MINISTRY'S PUSH TO GOC'S 
CHARGE A FEE EQUAL TO A FOREIGN EMPLOYEE'S MONTHLY SALARY INSTEAD OF 
A FIXED CHARGE EQUAL FOR ALL FOREIGH EMPLOYEES, REGARDLESS OF 
SALARY, CONTINUED TO WORK ITS WAY THROUGH THE GOC BUREAUCRACY.  DE 
MAHIEU TOLD AMBASSADOR THAT ESSO/CHAD WOULD NOT BUDGE ON THE ISSUE 
OF THE WORK PERMIT PRICE HIKE, NOT ONLY BECAUSE IT WOULD CREATE A 
PRECEDENT IN WHICH OTHER AFRICAN COUNTRIES WHERE EXXON MOBIL 
OPERATED COULD FOLLOW SUIT BUT ALSO BECAUSE IT VIOLATED SIGNED 
CONTRACTS AND CONVENTIONS.  IF THE GOC ACTED ON THE WORK PERMITS, 
ESSO/CHAD WOULD TAKE THE CASE TO THE INTERNATIONAL CHAMBER OF 
COMMERCE IN PARIS, BUT THAT WAS A REMEDY THAT WOULD TAKE TIME.  IF 
THE GOC ACTED, ESSO/CHAD WOULD ALSO START TO SEND ITS EXPERT FOREIGN 
STAFF HOME AS THEIR OLD PERMITS EXPIRED, STARTING AUGUST 15. 
WITHOUT THAT STAFF, OIL PRODUCTION WOULD SOON START TO DECREASE.  IN 
ADDITION, PENDING CONSORTIUM DECISIONS TO MAKE SIGNIFICANT NEW 
INVESTMENTS IN CHAD WOULD BE CALLED INTO QUESTION. 
 
¶6.  (SBU) AMBASSADOR PROPOSED THAT THE USG AND ESSO DO A JOINT 
DEMARCHE, FIRST TO THE PRIME MINISTER AND THEN TO HAROUN KABADI, 
SECRETARY GENERAL OF THE PRESIDENCY (GENERALLY EQUIVALENT TO THE 
WHITE HOUSE CHIEF OF STAFF).  AMBASSADOR AND DE MAHIEU SAW THE PM ON 
AUGUST 5 AND PRESENTED ESSO'S CASE.  THE PM LISTENED INTENTLY, 
RESPONDED SYMPATHETICALLY, AND PROMISED TO TAKE ACTION.  IN ANY 
EVENT, HOWEVER, THE LABOR MINISTRY'S PUSH TO CHANGE FOREIGN WORK 
PERMITS CONTINUED TO MAKE ITS WAY THROUGH THE BUREAUCRATIC CHAIN. 
AMBASSADOR AND DE MAHIEU FOLLOWED WITH AN AUGUST 7 PITCH TO SEC-GEN 
KABADI.  KABADI, A FORMER PM AND DEEPLY VERSED IN THE POLITICS OF 
OIL IN CHAD, DEMONSTRATED THAT HE GOT IT.  HE SAID THAT THE 
PRESIDENCY DID NOT HAVE ALL THE ELEMENTS NECESSARY TO MAKE A 
DECISION AND MANY OF THE DOCUMENTS CITED BY DE MAHIEU HAD NOT BEEN 
COPIED TO THE PRESIDENCY BY THE MINISTRIES INVOLVED.  HE SAID 
FURTHER THAT THIS WAS AN IMPORTANT MATTER THAT SHOULD NOT BE RUSHED. 
 HE ASKED DE MAHIEU TO SEND HIM COPIES OF ALL THE RELEVANT DOCUMENTS 
AND CORRESPONDENCE BETWEEN ESSO/CHAD AND THE GOC. 
 
¶7.  (SBU) ON AUGUST 10, DE MAHIEU TOLD AMBASSADOR THAT HE UNDERSTOOD 
THAT THE GOC HAD DEFERRED ANY DECISION ON THE QUESTION OF FOREIGN 
WORK PERMITS UNTIL THE END OF THE YEAR, PENDING MUCH FURTHER STUDY 
AND NEGOTIATIONS BETWEEN THE GOC AND ESSO/CHAD.  ON AUGUST 12, 
KABADI CALLED THE AMBASSADOR TO RELATE THAT NY GOC DECISION ON THE 
ISSUE OF WORK PERMITS HAD BEEN DEFERRED PENDING FURTHER STUDY. 
 
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NDJAMENA 00000338  002 OF 002 
 
 
WHAT THE PROJECT MEANS 
FOR THE U.S. ECONOMY 
---------------------- 
 
¶8.  (SBU) THE CHAD/CAMEROON PIPELINE PROJECT REPRESENTS THE LARGEST 
U.S. INVESTMENT IN SUBSAHARAN AFRICA.  THE U.S. ECONOMY IS THE MAJOR 
BENEFICIARY FROM THIS PROJECT WHICH HAD GENERATED OVER 1,000 
AMERICAN JOBS AND 83 MILLION USD IN PERSONAL INCOME.  OVER 50 
PERCENT OF THE PROJECT'S MATERIAL PURCHASES AND CONTRACTED LABOR ARE 
SOURCED FROM THE U.S.  TO DATE, OVER TWO BILLION USD OF PROFIT HAS 
BEEN RETURNED TO U.S. SHAREHOLDERS THROUGH DIVIDENDS. 
 
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WHAT THE PROJECT 
MEANS FOR CHAD 
---------------- 
 
¶9.  (SBU) OIL INCOME, THROUGH ROYALTIES OR EXPORT DUTIES, ACCOUNTS 
FOR 75 PERCENT OF THE GOC'S REVENUE.  THE AUTUMN 2008 DECLINE IN OIL 
PRICES TRIGGERED A 2009 GOC REVENUE CRISIS, AS THE GOC HAD BUDGETED 
A MUCH HIGHER DOLLAR-VALUE PER BARREL AND HAD MADE PUBLIC SPENDING 
COMMITMENTS BASED ON THE HIGHER REVENUE STREAM.  UNWILLING TO CUT 
INFRASTRUCTURE COMMITMENTS, THE REVISED 2009 BUDGET, BASED ON A 
LOWER PER-BARREL PRICE OF OIL, LEAVES THE GOC A 840 MILLION USD 
DEFICIT. 
 
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COMMENT 
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¶10.  (SBU) THE CHAD-CAMEROON OIL PIPELINE PROJECT IS THE BIGGEST 
SINGLE U.S. PRIVATE INDUSTRY INVESTMENT IN SUBSAHARAN AFRICA.  CHAD 
DEPENDS ON THE REVENUES IT GETS FROM THE PROJECT FOR THE VAST 
MAJORITY OF ITS PUBLIC REVENUES.  REDUCED PRODUCTION IN THE SHORT 
TERM AND REDUCTION OR ELIMINATION OF FUTURE PLANNED INVESTMENT BY 
THE CONSORTIUM IN THE LONGER TERM WOULD BE DEVASTATING TO CHAD'S 
FINANCES AND HAVE A NEGATIVE IMPACT ON THE U.S. ECONOMY.   THE 
EQUITIES OF BOTH THE U.S. AND CHAD ARE PROTECTED BY CONTINUED CLOSE 
COLLABORATION BETWEEN EXXON-MOBIL AND THE GOC. 
 
 
NIGRO