US embassy cable - 03ABUDHABI1138

C O N F I D E N T I A L ABU DHABI 001138 
 
SIPDIS 
 
DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA 
USDOE FOR INT'L AFFAIRS - COBURN, ALSO CALIENDO 
USDOC FOR 1000/OC/ 
USDOC FOR 4520/ITA/IEP/ONE 
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI 
4500/ITA/MAC/DAS/WILLIAMSON 
3131/CS/OIO/ANESA 
 
E.O. 12958: DECL 03/10/08 
TAGS: EPET, PGOV, BEXP, ENRG, ECON, EINV, TC 
SUBJECT:  ABU DHABI NATIONAL OIL COMPANY (ADNOC): TOUGH NUT 
TO CRACK 
1. (U) Classified by DCM Richard Albright, for reasons 
1.5 (B) and (D). 
 
 
2.(C) Summary and comment: Aspiring participants in the 
UAE oil market -- including American oil companies -- continue 
to find it difficult to get a foot in the door at ADNOC, the 
Abu Dhabi National Oil Company.  ADNOC officials continue to 
favor their existing equity partners (the "Big Four" 
ExxonMobil, BP, Shell and TotalFina Elf) over outsiders, based 
in part on the close business and personal relationships the 
Big Four have established over time with the Abu Dhabi 
leadership. ADNOC recently has sought out contact with smaller 
American firms, but its continued preference to partner 
with the oil majors on larger projects indicates that UAE oil 
officials are comfortable with the familiar, and wary of 
newcomers.  Although other American companies often bring 
cutting-edge technology, managerial expertise, and plenty of 
money to the table, across the board they are finding that 
"business development" in the UAE oil sector is an arduous 
task. End summary and comment. 
 
3.(C) Occidental Petroleum, a medium-sized American oil 
company that is already an equity partner with the UAEG (but 
not ADNOC) on a major gas project, is taking concrete steps 
to make a name for itself in Abu Dhabi's upstream oil sector. 
Oxy recently established a permanent office in Abu Dhabi, 
symbolizing to ADNOC its commitment to doing business here. 
According to its representative in Abu Dhabi, the company is 
trying to partner with ADNOC on smaller projects -- deep gas 
extraction projects to help Abu Dhabi meet its short-term gas 
demand, for example -- and has agreed to fund a study with 
ADNOC's Petroleum Institute on the feasibility of carbon 
dioxide injection techniques.  While the company 
representative (please protect) hopes that this goodwill 
eventually will translate into upstream oil contracts, he 
implied to Econchief that he has not been able to make inroads 
with key decisionmakers at ADNOC and the Supreme Petroleum 
Council -- and, he conceded it is in oil, not gas, where the 
real money lies. 
 
4.(C) Another American oil company, Chevron-Texaco, was 
invited by ADNOC last year to bid on a 26 percent equity stake 
in ZADCO -- the joint venture company that operates the mammoth 
Lower Zakum oil field.  This project is both technologically 
complex and commercially lucrative (the field holds an 
approximate 40-50 billion barrels of oil; half of Abu Dhabi's 
reserves), and both US and Middle East- based Chevron execs 
have visited the UAE on several occasions to lobby ADNOC CEO 
Yousef bin Omeir. Yet ADNOC, which invited Chevron-Texaco to 
bid on ZADCO, has since had little good to say regarding 
the firm's prospects -- ADNOC Deputy CEO Abdullah Bin Nasser 
Al-Suweidi has told us, "it is hard for outsiders to submit 
winning bids because they don't know us," and both he and the 
ADNOC CEO, while privately volunteering good things about 
ExxonMobile's ZADCO bid, have generally refrained from 
mentioning Chevron-Texaco at all, hardly a good sign. 
 
5.(C) Even in the oilfield services sector, ADNOC officials 
prefer to deal with established players in the UAE.  Most 
recently, ADNOC Deputy CEO surprised Econchief and Econoff by 
asking for recommendations of smaller American companies -- as 
an alternative to majors Halliburton and Schlumberger, which 
have both had long and profitable relationships with ADNOC -- 
to participate in a joint venture with the Al-Fahim Group 
(Abu Dhabi) for cased holed logging and wireline perforating 
services.  Although Econoff, working with FCS, passed ADNOC 
officials a list of U.S. companies that specialized in this 
technology, ADNOC signed a joint venture agreement in January 
with major oilfield services company Halliburton. 
 
Wahba