Cablegate: Subject: Demarche Request Re Potential Indonesian

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FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5074
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RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 002087

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR SGOOCH

E.O. 12958: N/A
TAGS: ECON EINV ENRG
SUBJECT: SUBJECT: DEMARCHE REQUEST RE POTENTIAL INDONESIAN
INTEREST IN OCCIDENTAL PETROLEUM,S FORMER BLOCK 15 IN
ECUADOR

REF: STATE 81527

1. (U) This is an action request; see para 7.

2. (SBU) Summary: Press reports indicate Indonesia's
state-run oil company Pertamina is interested in running
Occidental Petroleum's (Oxy) former Block 15 in Ecuador
under an Energy Cooperation MOU signed between the two
countries in July. French, Indonesian, and Ecuadorian papers
ran the story. An Ecuadorian industry contact believes the
story was promoted by the GOE to soothe Indonesian feelings
after state-run companies were shut out of a recent sale of
Petroecuador's crude, and that Pertamina does not have the
funds for such a large investment. Nevertheless, Embassy
Quito recommends that Washington transmit reftel to Embassy
Jakarta in order to advise the Government of Indonesia of the
risks of becoming involved in Block 15. End Summary.

3. (U) Background: In May, the Government of Ecuador
declared Oxy's operations contract null, and state oil
company Petroecuador took over Oxy's assets, operations, and
revenue. Oxy believes this action violated the U.S.-Ecuador
Bilateral Investment Treaty (BIT). The case is currently
pending international arbitration.

4. (SBU) Reftel noted that Petroecuador does not have the
level of expertise to operate the sophisticated technology
that Oxy installed to run Block 15, and may seek assistance
from third-party state oil companies. It instructed a number
of embassies (although not Jakarta) to demarche host
governments on the issue and warned of the pitfalls of
foreign parastatal involvement in Block 15. To date, no
foreign parastatal has agreed to help operate Block 15.

5. (U) Foreign Minister of Ecuador Carrion visited Indonesia
in July and signed an energy cooperation MOU. He is quoted
in the press as saying that "Pertamina has reaffirmed its
interest in developing Oxy's Block 15 together with
Petroecuador." The MOU reportedly calls for cooperation on
the drilling, production, and refinement of crude oil, but we
understand that it does not specifically address Block 15.

6. (SBU) Comment: Indications from the head of the
hydrocarbons association in Ecuador (and our own perceptions)
are that Pertamina is unlikely to become involved in Block
15. Per the hydrocarbons expert, Pertamina does not have the
resources for such a large investment, particularly for one
so far from Indonesia. He believes the GOE statement was
made to soothe Indonesian feelings after Petroecuador's
recent sale of crude oil went to private rather than
state-run firms (Ecuador claims to favor state-run oil
companies and has signed cooperation agreements with
several). Although Embassy Quito believes Indonesian
development of Block 15 is unlikely, given the GOE statement,
we recommend that Embassy Jakarta pass the reftel message to
the Indonesian government .

7. (SBU) Action Request: We request that Washington instruct
Embassy Jakarta to demarche the Indonesian government using
the talking points from Reftel para 6. End Action Request.
JEWELL

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