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Cablegate: Sudan: Separate Abyei's Oil and Land Negotiations and Plan

VZCZCXYZ0000
PP RUEHWEB

DE RUEHKH #1719/01 3081429
ZNR UUUUU ZZH
P 041429Z NOV 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC PRIORITY 9070

UNCLAS KHARTOUM 001719

SIPDIS

DEPT FOR AF/SPG, AF/EPS, AND EB/ESC/IEC
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON EAID ENRG SU
SUBJECT: SUDAN: SEPARATE ABYEI'S OIL AND LAND NEGOTIATIONS AND PLAN
NOW FOR FUTURE OF OIL SAYS NORWEGIAN ENVOY

REF: KHARTOUM 1709

1. (SBU) SUMMARY: In a November 3 meeting with Special Envoy
Andrew Natsios, the Norwegian Petroleum Envoy to Sudan Anders
Hannevik reported that he has urged Sudanese leaders to separate
Abyei's oil and land negotiations. He also shared his calculations
of northern and southern percentages of both production and revenue,
and predicted that the North could lose significant oil revenues if
South Sudan secedes in 2011. He urged all parties to start planning
for the future of the oil industry post-2011 and warned that an
agreement needs to be reached sooner rather than later, or
disagreements over oil could potentially lead to war. END SUMMARY.


--------------------------------------------- --------
PRODUCTION AND REVENUE PERCENTAGES OF NORTH AND SOUTH
--------------------------------------------- --------
2. (SBU) According to Hannevik, South Sudan currently produces
between 66-77 percent of Sudan's oil. The revenue sharing between
the North and the South, however, is the exact inverse, with the
North taking two-thirds of total oil revenue. (Note: This
difference between Southern production and revenue is due to the
conditions laid out in the Comprehensive Peace Agreement where
"fifty percent (50%) of net oil revenue derived from oil producing
wells in Southern Sudan shall be allocated to the Government of
Southern Sudan (GOSS)... and the remaining fifty percent (50%) to
the National Government and States in Northern Sudan." End Note.)
Hannevik stated that oil production in Sudan is near or past peak
production unless there are significant new discoveries. Hannevik
said representatives from the Department of Exploration and
Development at the Sudanese Ministry of Energy and Mining have told
him there have been no recent major discoveries. Hannevik predicted
that the South's oil revenue could rise after 2011 from $1.5 billion
a year to $5-7 billion a year if the South secedes. He noted that a
reciprocal fall in northern revenues could lead to great
instability, increased tension, and potentially "disastrous
consequences."

-----
ABYEI
-----
3. (SBU) According to Hannevik's calculations, 67 percent of all
oil lies in the south, 20 percent in the North, and 14 percent in
Abyei. He stated that oil production in Abyei is on the decline,
but is still a significant source of production for Sudan, and
especially for the North, with half of its production coming from
the region. He said that Abyei has been more thoroughly explored
than the rest of the country (with more seismic run activity and
exploratory drilling) and that there is nothing to indicate that
this region has significant undiscovered oil reserves.

4. (SBU) Hannevik stated that all oil revenue earned from fields
produced in Abyei currently goes to the Government of National Unity
(GNU). He stated that Khartoum currently owes the autonomous
Government of South Sudan (GoSS) oil revenues from Abyei, estimated
to be $300 million. (Note: This appears to be a clear violation of
Chapter IV (3.1) of the CPA, which states that "Without prejudice to
the provisions of the Wealth Sharing Agreement, the net-oil revenue
from the oil produced in Abyei Area shall be shared during the
Interim Period as follows: 50% to the National Government; 42% to
the GoSS; 2% to Bahr El Ghazal Region; 2% Western Kordofan; 2% to
the Ngok Dinka; 2% to the Misseriya people." End Note). Without a
resolution to Abyei, oil revenues will continue to go to the North,
and therefore Hannevik speculated it may be in the interest of the
North to delay a final resolution to the Abyei standoff. He said
that the GoSS stands to lose a total of $1.7 billion by 2011 if a
solution on Abyei is not reached by then. Hannevik believes that it
is unrealistic for the GoSS to expect that the GNU will ever pay for
past oil revenues from Abyei, since this is "money they have already
spent and no longer have."

5. (SBU) According to Hannevik, the North values Abyei for its
oil, while the South attaches more importance to the region's land,
water, and historical and cultural dimensions. Hannevik stated that
he has become more and more convinced of the need to split the
negotiations of oil from those on territory. Hannevik's colleague,
Einar Risa, a Special Adviser for the International Program for
Petroleum Management and Administration (PETRAD,) said he envisions
a land border for Abyei that would be quite different from the
border used for oil rights. Risa pointed to resolution of East
Timor's independence from Indonesia and current negotiations between
Norway and Russia on their Barents sea boundary as two models of
where land and oil issues have been separated during negotiations.
SE Natsios suggested preparing a list of such agreements as an
incentive to the parties to show them what is possible.

6. (SBU) Hannevik reported that he has proposed this idea of
dividing Abyei's land from its oil negotiations to South Sudan
leaders. Although many GoSS leaders have appeared receptive to the

idea, he stated that the Secretary General of the Sudan People's
Liberation Movement, Pagan Amum, appeared to initially be against
this idea, while Foreign Minister Deng Alor (who is a Ngok Dinka
from the region) guarded his reaction. Hannevik said that he will
present this idea to the North's National Congress Party (NCP)
leaders.

-------------------------
NORWEGIAN RECOMMENDATIONS
-------------------------
7. (SBU) Hannevik ended his presentation with a number of
recommendations. He stated his view that an early solution to Abyei
is in the interest of the Government of Southern Sudan, as every
month that passes without a solution translates into lost, and
likely unrecoverable, oil revenue. The Petroleum Envoy also
speculated that the North's significant losses of oil revenue
following the 2011 referendum "may be unacceptable for the NCP and
could potentially lead to disastrous results." He stated that a
post-2011 sharing mechanism needs to be agreed upon before the North
and South view war as the final arbiter. (He added that when Pagan
Amum was briefed about the 2011 decline in oil revenues for the
North, Amum said "This means war.") Hannevik ended his presentation
stating that peace should have a quantified value. He observed that
if the sole criterion for future policy is the amount of oil revenue
a party can reap, war may be the only option, but he noted that for
the South, Abyei will become less and less of an important oil
revenue source over time.

8. (SBU) COMMENT: Post previously proposed separating Abyei's oil
and land negotiations. This idea warrants further detailed study
with particular attention given to successful models (e.g. East
Timor) where this has worked before. While war is always a
possibility in Sudan, there is also a chance, slim perhaps, that the
two sides may share, since pipelines, refineries, and infrastructure
are in the North and reserves are in the South. But both partners
feel a strong sense of entitlement about oil wealth. END COMMENT.


8. (U) S/E Natsios was not able to clear on this cable prior to his
departure.

9. (U) Hannevik promised to provide an updated copy of his Power
Point presentation in the coming weeks. Post will forward this
presentation to the Department as soon as it is delivered.

FERNANDEZ

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