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DE RUEHNJ #0551/01 3241118
ZNR UUUUU ZZH
O 201118Z NOV 09
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7456
INFO RUCNFUR/DARFUR COLLECTIVE PRIORITY
RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0069
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/HQ USAFRICOM STUTTGART GE PRIORITY

UNCLAS SECTION 01 OF 02 NDJAMENA 000551 
 
SIPDIS 
SENSITIVE 
 
STATE FOR AF/C 
STATE AND S/USSES 
OSD FOR DASD HUDDLESTON NSC FOR GAVIN 
LONDON FOR POL - LORD 
PARIS FOR POL - BAIN AND KANEDA 
ADDIS ABABA ALSO FOR AU 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EPET PREF CH CD
SUBJECT: ESSO CHIEF ON CHINESE OIL PROJECTS IN CHAD 
 
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SUMMARY 
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¶1.  (SBU) The Chinese are making  concrete progress to 
exploit wells, build a pipeline system,  and construct a 
refinery near the capital for domestic production, after 
years of speculation about Chinese development of oil fields 
in Chad, ESSO/Chad chief de Mahieu told Ambassador November 
18, calling the Chinese ventures positive for Chad and local 
competition.  De Mahieu said he was impressed with the 
Chinese National Petroleum Company's (CNPC) leadership here, 
but underscored that the Chinese would not likely have the 
same rigorous construction, maintenance, and environmental 
standards as ESSO/Chad.  He estimated that even limited 
Chinese oil production could compensate down the road for 
reduced ESSO/Chad production and judged that the CNPC could 
see a small profit on its oil projects, especially if it sent 
some of its production to the world or Chinese market by 
linking to ESSO/Chad's pipeline for exportation. 
 
¶2.  (SBU) If the CNPC realizes its project to refine Chadian 
oil in Chad for local consumption, it will be a major triumph 
for the Government of Chad, whoever is in power then, because 
the decades-old dream of even partial self-sufficiency in 
petroleum fuel has become part of Chad,s self-image and 
national prestige.  If the CNPC,s production for export can 
even partially offset the inevitable reduction of 
ESSO/Chad,s production as its southern wells give out, it 
will provide a softer landing for a Chad that can no longer 
count on substantial oil revenues.  END SUMMARY. 
 
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DOMESTIC REFINERY: 
MORE REALITY THAN DREAM 
----------------------- 
 
¶3.  (SBU) While there has been talk for decades years over 
the possibility of an oil refinery in Chad, the Chinese 
appear determined to realize this dream, by pumping Chadian 
oil from its southern field to the capital for refining for 
local fuel needs.   The Djermaya refinery, which will provide 
refined oil for domestic use, is in the design phase with 
construction expected to take less than two years.  The 
refinery, located 30 km north of N'Djamena , will be fed by 
the Bongor oil field, 300 km south of N'Djamena and, 
potentially, the small Sedigui oil field, north of Lake Chad. 
 The Chinese National Petroleum Company (CNPC) has the 
contract to develop the Bongor field and build a subterranean 
pipeline connecting it to the Djermaya refinery.  The GOC 
started to build the pipeline in July 2009, which is expected 
to be completed in 18 months, transporting 20,000 barrels per 
day.  The GOC is in discussions with KNM, a Malaysian 
company, to develop the Sedigui field, although no deal has 
been finalized. 
 
¶4.  (SBU) In a November 18 conversation with Ambassador, 
ESSO-Chad Chief Stephane de Mahieu shared his insights on the 
CNPC projects in Chad, most notably wishing the Chinese 
success with their endeavors.  De Mahieu believed that the 
competition would be good for the Chadian oil market.  He 
spoke highly of CNPC General Manager Dr. Dou Li Rong, calling 
him, "realistic, practical, with a solid engineering 
background and a good understanding of the situation on the 
ground."  De Mahieu viewed as positive CNPC's decision to 
hire several technical experts who had been involved in 
earlier oil exploration ventures in Chad.  The ESSO chief 
said that ESSO and CNPC had good relations, especially in 
terms of mutual aid issues and that ESSO had shared with CNPC 
much of its own environmental data and analysis.  De Mahieu 
also stated that ESSO was open to exploring CNPC's idea of 
linking to ESSO's pipeline to export a percentage of the oil 
from the Bongor fields and that ESSO could possibly sign a 
confidentiality agreement with CNPC in the near future to 
share ESSO's pipepline information. 
 
¶5.  (SBU) Drawing differences between ESSO's project and 
CNPC's efforts, De Mahieu felt that CNPC was under pressure 
from the GOC to complete the project, but that the Chinese 
 
NDJAMENA 00000551  002 OF 002 
 
 
company would not have as rigorous social, environmental, and 
fiscal standards as the ESSO project.  De Mahieu noted, 
however, that CNPC would have to adhere to IFC and other 
petroleum oversight bodies, as well as meet ESSO's 
environmental and other operating standards, if and when it 
connected to the ESSO pipline.  De Mahieu stated that he 
tried to convince the Chadian Ambassador to China of CNPC's 
need for a national coordination entity, with a single point 
of contact having appropriate authority in the government, 
similar to the one ESSO had during its development and 
building phase.  Separately, De Mahieu noted that Dr. Dou had 
said that CNPC had recently completed design plans for the 
Djermaya refinery and was considering purchasing some of the 
major equipment from U.S. manufacturers. 
 
--------------------------------- 
TO GET A CHINESE FOOT IN THE DOOR 
--------------------------------- 
 
¶6.  (SBU) Postulating on CNPC's profitability from the oil 
field, pipeline, and refinery ventures, de Mahieu guessed 
that CNPC would have lower building standards and, therefore, 
a lower cost structure for the project, estimating one 
billion USD or less for the whole project.  He guessed that 
CNPC could probably build the refinery for half of what it 
would cost ESSO.  At that same time, de Mahieu noted, CNPC 
would benefit from domestic price protection on fuel.  He 
estimated that the Chinese could see a small profit on the 
projects, which is characterizes as, "not bad as an entry 
ticket into the market."  He highlighted, however, the 
Chinese's different views of costs and benefits of a project. 
 For example, he said, they looked on labor as cheap or free; 
equipment from China as free; and oil going back to the 
mainland as a boost to industrial and economic activity. 
 
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FUTURE DEVELOPMENT? 
------------------- 
 
¶7.  (SBU) Commenting on the Sedigui field north of Lake Chad, 
de Mahieu said that he had heard of Malaysian interest in 
developing the field, to include a butane gas bottling plant, 
but it was unclear who would undertake that pipeline project 
as he did not believe that Chinese would.  De Mahieu 
calculated that if the Bongor and Sedigui fields came on line 
in the next five years, it would coincide with the decline of 
ESSO's output, likely keeping Chad's oil export volume flat. 
 
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COMMENT 
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¶8.  (SBU)  If the CNPC realizes its project to refine Chadian 
oil in Chad for local consumption, it will be a major triumph 
for the Government of Chad, whoever is in power then, because 
the decades-old dream of even partial self-sufficiency in 
petroleum fuel has become part of Chad,s self-image and 
national prestige.  If the CNPC,s production for export can 
even partially off set the inevitable reduction of 
ESSO/Chad,s production as its southern wells give out, it 
will provide a softer landing for a Chad that can no longer 
count on substantial oil revenues.  END COMMENT. 
 
¶9.  (U) minimize considered. 
NIGRO