Radzi
said that Petronas told MITI it does not have any investment in Iran
now and that the private companies (SKS and Amona) claimed they had no
financing sources for their projects in Iran. Radzi also described how
Malaysian firms go to Iran with suitcases of money to purchase oil and
gas concessions from the Iranians. He said that they bring too much cash
to count the money, so they weigh it to determine if the amount is
correct. Radzi did not offer why Malaysian firms would purchase an
O&G concession from the Iranians for a project they are unable to
finance.
THE CORRIDORS OF POWER
Raja Petra Kamarudin
C O N F I D E N T I A L SECTION 01 OF 02 KUALA LUMPUR 000037
SIPDIS
E.O. 12958: DECL: 01/19/2020
TAGS: ECON, EFIN, ENIV, ETRD, ETTC, IR, KNNP, MY
SUBJECT: MALAYSIA: ISA UPDATE - PETRONAS MOVING AWAY FROM IRAN INVESTMENT
REF: 09 STATE 121808
Classified By: Econ Counselor Matt Matthews for reasons 1.4(b) and (d)
1. (C)
Summary:
Post approached the three Malaysian companies listed in Ref A that are
reportedly doing business or contemplating doing business in Iran.
Petronas told us January 11 that it has no active investments in Iran,
no commitment has been made to invest in South Pars Phase 11 and its
contractual obligations in the Munir block are complete, with no further
investment under consideration.
Petronas officials noted that
Petronas is concerned about investing in Iran due to current political
uncertainties there. Amona told us via telephone they sold their oil
and gas (O&G) business, including any interest in the redevelopment
of the Resalat Oilfield.
Post has made contact with
representatives from SKS Ventures, which will be reported septel.
Ministry of Foreign Affairs (MFA) Principal Assistant Secretary and
America Desk Officer Muhammad Radzi Jamaludin (Radzi) told post that the
Ministry of International Trade and Investment (MITI) held a meeting
with Petronas, Amona, and SKS Ventures and told them to cooperate with
embassy inquiries on Iran investments.
End Summary.
2. (C)
Comment:
Our meeting with Petronas was at a surprisingly high level and the
information offered was unusually frank and forthcoming for such a
sensitive topic. As a Petronas Board member, Azhar is well positioned to
provide accurate information on Petronas' Iran investment plans. Post
will continue to press for additional details on Petronas South Pars
Phase 11 activity.
End Comment.
Petronas
3.
(C) Deputy Econcouns Salin and econoff Williams met January 11 with
Petronas Board of Directors Member and Corporate Secretary Mohd Azhar
Osman Khairuddin (Azhar) and his assistant, Head of Legal Research,
Planning and Issues Management, Abdul Rahim Mydin (Rahim) to query
Petronas about existing and planned investments in Iran,s oil and gas
sector (O&G) and awareness of the Iran Sanctions Act (ISA). Deputy
Econcouns delivered ref A points and provided additional background on
our information request.
4. (C) Azhar said that Petronas does
not have any investments in Iran at this time. Azhar explained that
Petronas aspires to be a global company and desires a positive
relationship with the USG. However, he related that Petronas was a
relatively late entrant to the O&G business and was not competitive
with international oil companies (IOCs) in most development areas.
Petronas
made the conscious decision in the mid 1990,s, with the blessing of the
GOM, to compete in countries where Western sanctions precluded the
largest IOCs from competing such as Iran, Sudan, Myanmar, and
Mauritania, according to Azhar. He claimed that in 1996 the Petronas
president met with Clinton Administration officials informing the USG of
Petronas, plans to invest in Iran and that Secretary Albright gave
Total, Gazprom, and Petronas ISA exemptions on South Pars Phases 2 and
3.
Azhar said that Petronas developed the Siri field without
an exemption and that both of Petronas, prior Iran projects are now
finished. He mentioned that Petronas does have an ongoing trading
relationship with Iran, exporting lubricants to Iran.
5. (C)
Azhar told us that Malaysian O&G reserves are not large and are
running out soon. (Note: Conoco Philips Malaysia confirmed that without
new discoveries, Malaysian oil production will decline at approximately
10% per year, from 550,000 bpd in 2008 to roughly 490,000 bpd in 2009
and 450,000 bpd in 2010.)
Azhar noted that revenues from
Petronas accounted for 45% of the GOM budget last year and stated that
the GOM is over-reliant on Petronas to fund its operations. He said
Petronas feels tremendous pressure to grow its business in order to
maintain Malaysia’s political status quo and added that Petronas wants
to stay insulated from politics, but must comply with GOM policy.
He
acknowledged the large amount of liquid assets on Petronas, balance
sheet and Petronas, concerns that those funds be invested in productive
O&G assets to promote future profitability rather than be spent now
on domestic programs for political gain. He described Petronas as a
stabilizing force in Malaysia and in ASEAN regionally and his desire
that the USG recognize the important role Petronas plays in maintaining
political stability in the region.
6. (C) Azhar was not aware
of press accounts of Petronas investment plans in the South Pars Phase
11 gas field and was noticeably irritated that Petronas gas subsidiary
Carigali had not mentioned Phase 11 when it briefed Azhar on its Iran
activities. He was quite clear, from his position as a member of the
Petronas Board of Directors, that no final investment decision had been
made on any new project in Iran.
Azhar added that Petronas is
closely following the political situation in Iran between President
Ahmadinejad and the opposition and stated that Petronas is very
concerned about investing in Iran at this point due to political
uncertainties and the possibility of "disruptive changes."
7.
(C) (Note: In a follow-up telephone call January 14, Rahim told econoff
that investment in South Pars Phase 11 is still under consideration, but
that Petronas has not committed to the investment. Econoff asked
follow-up questions on the status, timing, and cost of due diligence,
contract status with Iran/CNPC, and when a final decision could be
reached. Rahim asked econoff to forward the follow-up questions via
email and that he would try to respond. End Note.)
8. (C)
Azhar was excited about Petronas successful bid with Shell to develop
the Majnoon oilfield in Iraq. He praised the open and transparent
competitive bidding process and said that Iraq’s opening is putting a
lot of pressure on Iran. Petronas is bullish on the political situation
in Iraq and plans to compete for additional business in Iraq, according
to Azhar.
Amona Claims O&G Business Sold
9.
(C) Econoff and LES Tang Loon Lian contacted Amona December 9 via
telephone regarding its announced investment in the Resalat Oilfield.
An Amona representative told us Amona had sold its entire oil and gas
business to Oil Corp., a publicly traded Malaysian company.
Local
news databases did not report announcement of a sale. A search of
Bursa Malaysia publicly listed companies showed that Oil Corp. is losing
significant amounts of money and appears near bankruptcy.
Post will continue to check for additional details on the status of Malaysian participation in the Resalat transaction.
MFA and Trade Ministry Authorize Cooperation
10.
(C) During a January 12 meeting, Ministry of Foreign Affairs Principal
Assistant Secretary and America Desk Officer Muhammad Radzi Jamaludin
(Radzi) told econoff that he had recently attended a MITI-led meeting,
in which MITI called in Petronas, SKS Ventures and Amona and told them
to cooperate with the embassy in our ISA inquiry.
Radzi said
that Petronas told MITI it does not have any investment in Iran now and
that the private companies (SKS and Amona) claimed they had no financing
sources for their projects in Iran.
Radzi also described how
Malaysian firms go to Iran with suitcases of money to purchase oil and
gas concessions from the Iranians. He said that they bring too much
cash to count the money, so they weigh it to determine if the amount is
correct.
Radzi did not offer why Malaysian firms would
purchase an O&G concession from the Iranians for a project they are
unable to finance.
KEITH