Cablegate: France: Total Sa's Investment Projects

VZCZCXRO5661
PP RUEHIK
DE RUEHFR #1413/01 2941024
ZNR UUUUU ZZH
P 211024Z OCT 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 7379
RUCPDOC/USDOC WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 PARIS 001413

SENSITIVE
SIPDIS

STATE FOR EB, S/EEE, S/CIEA and EUR/WE

E.O. 12958: N/A
TAGS: EPET ECON EINV PREL FR IR KZ NI RS SU BM
SUBJECT: France: Total SA's Investment Projects

PARIS 00001413 001.2 OF 002

SENSITIVE BUT UNCLASSIFIED - CONTAINS COMMERCIALLY SENSITIVE
INFORMATION -- NOT FOR INTERNET DISTRIBUTION

SUMMARY
-------

1. (SBU) Total SA executives gave Deputy Assistant Secretary
Douglas Hengel an overview of investment activities in some of the
world's political hotspots. On Iran, they denied talks had resumed
on phase 11 of the South Pars gas field but expressed frustration
over Chinese companies entering the market. Total is not a major
supplier but does sell refined petroleum products to Iran. Total
will partake in upcoming talks on Iraqi oil fields not in production
and has a strong interest in Majnoon. The French oil major spoke
out against President Sarkozy's support of an oil price band. In
Nigeria, the company's financial exposure is great given the new
terms of the Petroleum Industry Bill. Total finds the Extractive
Industries Transparency Initiative useful and is committed to making
it work, but has concerns about the proposed U.S. Energy Security
and Transparency Act. Total refutes allegations of wrongdoing
related to its activity in Burma. Globally, Total's future
investment priorities for the firm include nuclear energy, solar
power, and second generation biomass, but not wind. End Summary.

2. (U) On October 13, Deputy Assistant Secretary for Energy,
Sanctions and Commodities, Douglas Hengel and Econoff met with the
following TOTAL representatives:

- Hubert Loiseleur des Longchamps, Senior Vice President
International Relations.
- Cherif Castel, Deputy Vice President, International Relations
- Thierry Bourgeois, Exploration and Production, Africa Division,
Vice President Nigeria.

Iran
----

3. (SBU) Total denied press reports that talks on phase 11 of the
South Pars (PS11) gas field had resumed. Technical, financial, and
contractual obstacles prevent this from moving ahead, Loiseleur
said, and the Iranians do not appear motivated to push the deal
forward. For now "there is no agreement to sign", he insisted.
(Note: Cherif Castel later confirmed that Total has been in talks
with Iran on a separate "LNG Pars" production project. They are
discussing an appropriate legal framework for the deal. End note.)
Total's long term goal is to resume discussions with Iran on SP11,
Loiseleur reiterated, but the company fears that they and other
Western companies will lose out to the Chinese who are proceeding to
lock up as many deals as they can in Iran.

4. (SBU) DAS Hengel mentioned that there might be more U.S.
legislation to tighten sanctions. He asked if Total is selling
refined oil products to Iran. Like other international energy
companies, that remains an option for Total, Loiseleur replied,
given the current amount of excess refined products on the market.
Total is not a major supplier but has sold some gasoline to Iran in
the past. He stated that Total's activity is legal and not covered
by the Iran Sanctions Act.

Iraq
----

5. (SBU) Turning to Iraq, Total plans to participate in the second
bid round talks on oil fields not in production, Loiseleur
confirmed. Like other oil majors, Total wants to be part of the
Majnoon field development. Loiseleur realizes it will require a lot
of wells, compressors, a pipeline to get the oil to shore, and
complete upgrades to the existing export facilities.

G8: Oil Price Band
------------------

6. (SBU) Loiseleur said Total is not in favor of President
Sarkozy's and Prime Minister Brown's support for using oil price
bands to curb price volatility. Total has talked with President
Sarkozy on this and "it appears he is getting the message",
Loiseleur stated without elaborating.

Russia - Shtokman gas project
-----------------------------

7. (SBU) Total's VP for International Relations estimated that a
final decision on the Shtokman project would be ready by the end of
next year and production could start in 2013. Total later confirmed
October 12 reports that CEO Christophe De Margerie announced during
the World Gas Conference that initial production would be delayed
and likely to start in 2015/2016.

Nigeria

PARIS 00001413 002.2 OF 002

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8. (SBU) Nigeria's proposed Petroleum Industry Bill would negatively
impact joint venture stakeholders by compromising new investment,
including gas generation and development, Total executives said.
Current licenses need legal protection and Total should have the
priority when they come to term, provided it fulfilled the
conditions of the license, Loiseleur believes. Yet the Bill's new
relinquishment terms mean some of Total's blocks can be put on the
market early and the Chinese are reportedly making offers
substantially higher than the going price, he told us. "We think
Nigeria is testing the market", Loiseleur said. The situation
constitutes Total's biggest financial exposure, he added. It is
unclear who has the most influence at the presidential level but the
right message is not getting through. On security, Total has not
had to halt production, but it is clear the GON needs to take
charge, Total VP for Nigeria, Thierry Bourgeois noted.

Kazakhstan
----------

9. (SBU) Asked about recent press reports of President Sarkozy's
visit to Kazakhstan during which he announced a Total deal to
develop the Russian-Kazakh Khvalynskoye field, Loiseleur said the
Production Sharing Agreement with KazMunaiGas (KMG) had been in
preparation for over five years. Sarkozy's visit coincided with the
signing but was unrelated to the negotiations, Total executives
claimed. (Note: According to Total's press release, the firm bought
a 17 percent stake of Khvalynskoye from the initial 50 percent
interest held by KMG. Russia's Lukoil owns the other 50 percent of
Khvalynskoye. The gas will be transported to Russia. End note.)

Other Areas of Concern
----------------------

10. (SBU) On Burma, Total publicly denied accusations of corruption
and human rights violations made by EarthRights International in its
September report. As for the Extractive Industries Transparency
Initiative (EITI), Total believes it is a useful initiative and the
company is committed to making it work. Governance is the weak
point in this sector, Loiseleur emphasized and others need to
address this issue, not the international oil companies. He voiced
concern about the proposed Energy Security and Transparency Act
introduced in the US Senate requiring companies listed on US stock
exchanges to disclose their extractive payments to foreign
governments. He argued that if this legislation becomes law, Total
and other companies, plus many implementing countries, would end
their involvement in EITI. This would set back the transparency and
good governance agenda, which benefits from the volQary nature of
EITI, and the USG would be charged with neo-colonialism by some
resource producers.

Future Investments
------------------

11. (SBU) Total sees nuclear energy, solar power, and second
generation biomass as parts of its future, Loiseleur asserted. The
company intends to participate financially and help build European
Pressurized Reactors in Abu Dhabi and Penly (France) alongside
Areva, EDF and GDF-Suez. Total also is looking at unconventional
gas, he added, but decided against investing in wind power projects.

Comment
-------

12. (SBU) Total's long term strategic interest in Iran has not
changed although the South Pars gas project is at a standstill. The
short term political conditions and technical and financial
obstacles prevent the project from moving forward. Like other
European oil companies, Total is concerned that the Chinese will
squeeze them out of the market. Total sees nuclear energy as an
important part of its long-term future and has Sarkozy's political
support to proceed as demonstrated by their participation in nuclear
reactor projects in the UAE and France. End comment.

(U) This cable has been cleared by DAS Hengel.

RIVKIN

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