US embassy cable - 05NDJAMENA1521

ESSO IN CHAD: CURRENT TRAVAILS, AND CONCERNS DOWN THE ROAD

Identifier: 05NDJAMENA1521
Wikileaks: View 05NDJAMENA1521 at Wikileaks.org
Origin: Embassy Ndjamena
Created: 2005-10-07 12:01:00
Classification: UNCLASSIFIED
Tags: ECON EFIN ENRG PGOV CD Oil Revenue Management Economic Trends
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.

071201Z Oct 05

ACTION EB-00    

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      INL-00   DODE-00  DOEE-00  ITCE-00  DOTE-00  DS-00    EXME-00  
      EUR-00   E-00     FAAE-00  UTED-00  VC-00    FRB-00   H-00     
      TEDE-00  INR-00   LAB-01   VCE-00   AC-00    NEA-00   NRC-00   
      NSAE-00  NSCE-00  OES-00   OMB-00   NIMA-00  EPAU-00  MCC-00   
      PER-00   GIWI-00  ACE-00   SP-00    IRM-00   SSO-00   SS-00    
      STR-00   TRSE-00  FMP-00   BBG-00   EPAE-00  IIP-00   SCRS-00  
      DSCC-00  PRM-00   DRL-00   G-00     NFAT-00  SAS-00   SWCI-00  
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FM AMEMBASSY NDJAMENA
TO SECSTATE WASHDC 2429
INFO AMEMBASSY ABUJA 
AMEMBASSY BAMAKO 
AMEMBASSY COTONOU 
AMEMBASSY DAKAR 
AMEMBASSY LONDON 
AMEMBASSY NIAMEY 
AMEMBASSY PARIS 
AMEMBASSY YAOUNDE 
USDOC WASHDC
UNCLAS  NDJAMENA 001521 
 
SIPDIS 
 
 
DEPT FOR AF, EB, ENERGY FOR CAROLYN GAY AND GEORGQPEARSON, 
TREASURY FOR OTA, LONDON AND PARIS FOR AFRICA WATCHERS, 
DAKAR FOR FCS REPRESENTATIVE CYNTHIA GRIFFITH GREENE 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ENRG, PGOV, CD, Oil Revenue Management, Economic Trends 
SUBJECT: ESSO IN CHAD: CURRENT TRAVAILS, AND CONCERNS DOWN 
THE ROAD 
 
REF: A. A)NDJAMENA 1227 
 
     B. B)NDJAMENA 1284 
     C. C) NDJAMENA 1431 
 
 1. (SBU) SUMMARY: Esso's labor, transportation and royalties 
issues with the GOC continue to brew.  The company has 
attempted to improve relations with the Government by 
sponsoring the visit of GOC officials to oil market 
operations in London and Washington.  However, GOC officials 
continue to criticize Esso for what it see as a failure to 
communicate.  Finally, the company is quite concerned with 
possible revisions to the Revenue Management Laws, and 
believes that any revisions that appear to affect the 
transparent spirit of the laws will lead to criticism of the 
Consortium.  END SUMMARY. 
 
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TCC SAGA: SOLUTION IS NEAR, OR IS IT? 
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2.  (SBU) During a September 16 phone conversation, Esso 
Country Manager Ron Royal told the Ambassador that the 
company had presented a proposal aimed at resolving the 
dispute involving ex-employees of former sub-contractor TCC 
demanding compensation for overtime hours (see Reftel A). 
According to Royal, the company sent a formal letter to Prime 
Minister Yoadminadji recommending the creation of a 
independent panel to be composed of representatives of TCC, 
the Chadian national labor union UST (the primary advocate 
for the ex-employees), and an auditor from Ernst and Young. 
The panel would review the cases on an individual basis, and 
the auditor would determine whether an ex-employee truly 
worked the number of additional hours that he or she 
maintained. 
 
3.  (SBU) Royal noted that while this process would involve 
reviewing hundreds of employee case files, it would be a fair 
and acceptable compromise for Esso.  The alternative, which 
would involve a collective settlement for all employees (even 
those who may not have worked additional hours), would 
establish a dangerous precedent for ex-employees who made 
similar allegations.  For the government's part, Prime 
Minister Yoadminadji told the Ambassador on September 30 that 
he had instructed that the proposal be forwarded to UST and 
was awaiting a response. 
 
4.  (SBU) On September 20, UST General Secretary Djbrine 
Assali told E/C officer that UST had received word of Esso,s 
proposed settlement through informal channels, and asserted 
that the ex-employees would never accept a solution that did 
not involve a collective agreement of all TCC employees. 
Assali noted that he would call on the International Labor 
Organization to conduct an investigation on the matter, and 
expressed optimism that international pressure against the 
consortium would benefit the cause of the ex-employees.  He 
also showed E/C officer a letter that UST sent to the 
Minister of Labor asserting that the organization would not 
negotiate with the Government or Esso until protesters 
incarcerated following a demonstration by the ex-employees in 
Kome on September 19 were released (NOTE: We have not been 
able to confirm the detention of the protesters in Kome. END 
NOTE).  He stated that the Government could never convince 
UST to accept a settlement with Esso and TCC on this matter. 
 
 
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AIRLINE ROYALTIES DISPUTE COMES BACK 
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5.  (SBU) Esso also attempted to resolve a dispute with the 
GOC concerning the payment of royalties of its charter 
flights from N,Djamena to Kome (a problem that it faced last 
year as well).  According to Royal during his conversation 
with the Ambassador, the Director of Civil Aviation informed 
Esso on September 15 that the Consortium,s charter 
air-service provider Shreiner was required to pay the Chadian 
national airQe Air Toumai a royalty of $150,000 per month, 
as indicated by the Convention that created Air Toumai in 
2004.  Esso has maintained that 1988 Convention frees the 
Consortium of any royalty payments, including royalties on 
air carriers. While the GOC was not able to provide a legal 
 
 
response to this issue, it still maintained that Esso had an 
obligation to pay the royalties.  Royal stated that he was 
already trying to explore an alternative to transport the 
company,s workers to Kome, one of which included the 
possibility of driving workers from Cameroon into Chad.  He 
did express concern, however, that the Chadian government may 
try to prevent Esso workers from entering the country, if 
such measures were taken. 
 
6.  (SBU) Following the Ambassador,s conversation with 
Royal, Shaw informed E/C Officer on September 20 that the 
Government had decided to allow Shreiner, for the moment, to 
continue to operate without paying any royalties, but would 
revisit this issue with the Consortium in December.  In a 
meeting between National Coordinator for the Doba Oil project 
Haroun Kabadi and the Ambassador, Kabadi stated that the 
pressure by the Government arose because new government 
officials were unclear of the importance of maintaining 
positive relations with international investors.  He also 
stated that the ultimate goal of the Chadian government is to 
promote the growth of its national airline, and the GOC would 
probably suggest that Toumai eventually become the carrier 
for Esso,s operations in the future. 
 
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CONTINUED TALK OF A NATIONAL OIL COMPANY 
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7.  (SBU) Amid these disputes, discussions of a national oil 
company to market Chadian crude continue in GOC circles (see 
reftel B).  Minister of Petroleum Oumar Hassan explained to 
the Ambassador on September 19 that the Government is still 
extremely interested in this idea.  According to the 
Minister, while the Government is not certain whether it can 
achieve the same price that Esso obtains in the international 
market, the existence of a national oil company will 
demonstrate the responsibility of the GOC in managing its own 
affairs.  While the Ambassador expressed concern over the 
maintenance of transparency of such a company, Hassan assured 
the Ambassador that the Government would take the necessary 
legislative precautions to ensure that any such company was 
free of corruption and malfeasance.  Abdelkarim Abakar, 
Director of Oil Revenue Legislation at the Ministry of 
Petroleum, affirmed the Minister,s comments to E/C Officer, 
on September 28, and said the Ministry was beginning the 
process of developing a proposal to deliver to the National 
Assembly by the end of this year. 
 
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ESSO REACHES OUT TO THE GOVERNMENT, WITHOUT MUCH SUCCESS 
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8.  (SBU) In response to the concerns prompting discussion of 
a national oil company, Esso recently sent two officials from 
the Ministry of Petroleum, one of which was Abakar, to 
Exxon-Mobil,s trading office in Fairfax to see first-hand 
how Doba crude is priced.  The officials also visited the 
international oil market in London to meet with crude oil 
traders and observe the pricing of oil.  Abakar told E/C 
officer that he was appreciative of the opportunity afforded 
by Esso.  He maintained, however, that the visit solidified 
the question of why Doba crude was priced so low when the 
price of oil in the international markets was priced at such 
a high level.  He also argued that, if Esso was truly willing 
to communicate openly with the Government on the pricing of 
Doba crude, it would have organized this visit a long time 
ago. 
 
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REVISIONS TO THE OIL REVENUE LAWS: BAD NEWS FOR ESSO? 
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9.  (SBU) As discussions to revise to the existing Revenue 
Management laws intensify, Esso is expressing concern over 
the implications of any changes to the Revenue Management 
laws on the company.  Royal told the Ambassador that in a 
meeting between President Deby and World Bank Representative 
Noel Tshiani during the previous week, the President stated 
that efforts to change the Revenue Management laws would 
commence when the National Assembly convened in October.  He 
pointed to the intense pressure the government was facing to 
 
 
pay salaries to civil servants, and noted that the inability 
of the GOC to utilize resources from the Fund for Future 
Generations to improve existing economic conditions was only 
hurting matters.  Royal expressed concern that any changes to 
the Revenue Management laws that altered the spirit of the 
laws would come back to haunt the Consortium. 
 
- - - - 
COMMENT 
- - - - 
 
10.  (SBU) These are clearly not the best of the times for 
the Consortium.  The lingering dispute with ex-employees of 
TCC is having a destabilizing effect on the Consortium's 
activities in the South, as strikes and demonstrations, while 
mostly peaceful, have created security concerns and 
temporarily hampered operations in Kome.  While the 
Consortium believes the end of the dispute is near, UST's 
unwillingness to participate in the resolution jeopardizes 
any long-term settlement.  The recurring quarrel over airline 
royalties, while solved for the moment, will come to the 
forefront in December, and will do little to inspire good 
relations between the GOC and Esso.  Complicating matters is 
the continued insistence by the GOC that it can market its 
crude more effectively than the Consortium.  The Government 
appears set to create a national marketing company, even 
though any involvement by the GOC in the marketing of Doba 
crude will call into question the transparency of the Revenue 
Management Process and undoubtedly create further friction 
with the Consortium. 
 
11.  (SBU) The most pressing questions remains treatment of 
revenues.  Esso is justifiably concerned by the effect of any 
changes to the Revenue Management laws on its international 
image.  The Consortium already received a scare when the 
Government formally proposed depositing new oil revenues not 
covered by those laws directly in the Public Treasury (see 
reftel C).  While the Government eventually backed off this 
request, and permitted the  revenues to follow the existing 
revenue management process, the Consortium expects the GOC to 
insist on depositing the next payment from the new fields 
directly into its account. 
WALL 
 
 
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