Cablegate: Newly-Appointed Dpm Hai Nixes Gannon Project

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RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #1681/01 2631346
ZNR UUUUU ZZH
R 201346Z SEP 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6391
INFO RUEHHM/AMCONSUL HO CHI MINH 3717
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 001681

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR FOR DBISBEE
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: ECON ETRD ENRG PREL PGOV PHUM KIPR EAID VM
SUBJECT: NEWLY-APPOINTED DPM HAI NIXES GANNON PROJECT

REF: (A) HANOI 1379 ("Chevron Executives Discuss Energy");

(B) HANOI 1616 ("Prodding the GVN");
(C) HANOI 1569 ("GVN Poised To Choose Airbus");
(D) HANOI 1550 ("Czars in the Making?")

HANOI 00001681 001.2 OF 002

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET.

1. (SBU) SUMMARY: During a September 18 meeting with Ambassador
Michalak, new Deputy Prime Minister (DPM) Hoang Trung Hai said that
U.S. power-producer Gannon would not receive a license to build a
clean coal-fired plant in central Vietnam. Hai also asked the
Ambassador to urge ConocoPhillips to resume work in a disputed area
of the South China Sea, supported the Chevron Malay-Tho Chu Basin
gas concession, and said he recently signed a letter ordering a
state-owned cable company to stop broadcasting pirated signals. For
his part, Ambassador Michalak advocated for commercial deliverables,
outlined his priorities in Vietnam, and urged the GVN to tackle
copyright and trademark infringement issues. END SUMMARY.

GVN TO TURN DOWN GANNON POWER GENERATION PROJECT
--------------------------------------------- ---

2. (SBU) During their one-hour long meeting, the DPM told Ambassador
Michalak that the proposal by U.S. power producer Gannon to develop
a 750-megawatt gas power plant in Dong Nai Province in central
Vietnam would not go forward. DPM Hai explained that Vietnam does
not have adequate gas supplies to fuel the plant and that there is
local resistance to the project due to environmental concerns.
Although Ambassador Michalak emphasized Gannon's clean coal and low
emissions, Hai said the GVN has concluded that the already high
pollution levels in Dong Nai Province created by the existing, small
capacity 150-megawatt coal-fired plant rule out construction of
Gannon's proposed additional and much larger power station.

3. (SBU) As an alternative, the DPM recommended that Gannon submit
bids for a new 1,200-megawatt power station in central Vietnam's
Thanh Hoa Province. DPM Hai also said that he was favorably
inclined to the proposal by the U.S. company AES to develop the Mong
Duong II coal-fired power plant in Quang Ninh Province, saying he
would request an update from relevant authorities regarding ongoing
negotiations.

4. (SBU) Turning to another important energy project, the
Ambassador said he was "pleased to hear" that the DPM recently
signed a directive ordering state-owned oil company PetroVietnam to
speed up negotiations with Chevron over the U.S. energy company's
gas concession in Blocks B and 52/97 in the Malay-Tho Chu Basin in
the Gulf of Thailand (REF A). The DPM acknowledged the long-running
Chevron-PetroVietnam negotiations and said it is "now time for the
relevant parties to come to a timely conclusion." Underscoring
Vietnam's difficulty in securing adequate natural gas supplies, the
DPM also urged the Ambassador to push ConocoPhillips to speed up its
exploration for gas in Block 5-3 in a disputed area of the South
China Sea.

COPYRIGHT INFRINGEMENT AND SIGNAL PIRACY
----------------------------------------

5. (SBU) Ambassador Michalak noted that Vietnam's Supreme Court has
yet to issue a circular criminalizing commercial-scale copyright and
trademark infringement more than eight months after WTO accession
(REF B). He asked the DPM to expedite publication of this important
circular and Hai promised to inquire into the matter. Unprompted,
the DPM also informed the Ambassador that he recently signed a
letter ordering Vietnam's state-owned cable broadcaster VTC to
negotiate "a lawful agreement" with the U.S. and other foreign
channels whose signals VTC steals and broadcasts.

FLYING THE DREAMLINER
---------------------

6. (SBU) Advocating for Boeing's ongoing effort to sell 787
"Dreamliner" to state-owned Vietnam Airlines, the Ambassador pointed
out that the airline would enjoy a 10-year operating cost reduction
of $400 million by procuring the 787 instead of the Airbus A350 (REF
C). He added that a Boeing aircraft purchase would also be
effective way to address the trade gap between our two countries.
The Ambassador also noted that Boeing is currently assisting Vietnam
Airlines to prepare to fly to the United States in 2008-9 and said
that he looked "forward to riding aboard a Boeing 787 on the
inaugural flight from Vietnam to the United States." In response,
the DPM acknowledged that Vietnam Airlines is poorly equipped to
manage Vietnam's rapidly expanding tourism market and said he would
ask the airline to "expedite the talks" with Boeing.

REFORMING VIETNAM'S HYDROCARBONS REGULATORY FRAMEWORK
--------------------------------------------- --------

HANOI 00001681 002.2 OF 002

7. (SBU) The Ambassador and Hai also discussed Vietnam's plans to
reform its hydrocarbons' laws. Ambassador Michalak offered United
States know-how and assistance. "We stand ready to help," he said,
and encouraged the Ministry of Industry and Trade (MOIT) to go to
the United States to review our hydrocarbons regulations. Hai
thanked him and acknowledged the GVN must develop additional
provisions for Vietnam's mid and downstream petroleum and gas sector
and that he would speak with MOIT officials about the possibility of
traveling to the United States.

HAI'S NEW POSITION AND ROLE AS DPM
----------------------------------

8. (SBU) DPM Hai is one of two new Deputy Prime Ministers in the GVN
with oversight over the MOIT, and the ministries of Agriculture,
Rural Development, Natural Resources and the Environment (REF D).
The Ambassador noted that he looked forward to working with DPM Hai
on a "full range of economic issues." Ambassador Michalak also gave
the DPM a brief overview of the three areas in which he hopes to
make significant progress during his tenure in Vietnam, including
human rights issues; deepening and expanding the U.S.-Vietnam
economic relationship; and increasing opportunities for Vietnamese
students to study abroad in the United States.

COMMENT
-------

9. (SBU) After a prolonged silence, the GVN appears to have come to
the conclusion that Gannon's project is not a good fit for Vietnam.
In delivering the news, Minister Hai showed himself to be
well-informed and already plugged in to the decision-makers in the
Prime Minister's office. Whether he can break the gridlock that
delayed a decision on Gannon and other long-pending projects
involving U.S. businesses remains less certain.

MICHALAK

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