just a theory ..., page-35

re: just a theory ...gold star Kahuna, I wrote this post on my home board (Motley fool uk) at the time of the Sterling deal (28/10)

“The news on the deal between Sterling and the Mauritanian government disturbs me a little.

The Woodside consortium, and no doubt the Dana one, reputedly has an excellent long standing relationship with the Mauritanian government, based on the existing unchanged Hardman team who initiated the contracts with Mauritania years ago.

Given this good relationship, which obviously needs to be, and IMHO has been, nurtured by both consortia, as evidenced by the recent granting of an extension of the pre drilling period on block 8, why do the Mauritanian government need such arrangements?

I would have thought that the obvious way forward would have been an arrangement where the Government earned in to its percentage by arrangement with the consortium over a period of deferred royalties / tax, and that given the potential scope of the Mauritanian fields and the likely long timescale of operations in Mauritanian waters, the consortium would not have been prepared to spoil relationships by failing to co-operate at this stage. This would surely have served the Mauritanian national interest, ie. provided a better return than borrowing the cash and having to cover the borrowing cost as well as provide incentive to the “lender”.

So, why?

There are only two obvious points that spring to mind as possible reasons (please bear in mind that I saw quite a few “brown envelope” deals with politicians, and others, at close quarters in the far east, with "brown envelope" values up to £ tens of millions, and this may cloud my judgement).

One is that this deal probably allows increased obfuscation of the finances, with the inevitable conclusion that perhaps funds will become easier to siphon off without detection.

Secondly, and more worryingly to me, this might indicate that the regime in Mauritania has decided that “a bird in the hand is worth two in the bush”. The deal may have presented an opportunity to bring forward availability of substantial lumps of cash, even though it was detrimental in total cash over the longer term. The obvious implication of this line of thought is that the regime is looking after its own interest, rather than the national one, and perhaps does not expect to be in power very long.

The one positive thing that I see in this is that HNR, WPL, DNX etc have kept out of this.

Probably talking out of my arse, in fact I hope so!

No doubt someone will put me right with the real reason.

Regards.”

If my theory in that post, that the regime is after early cash because it doesn’t expect to be there long, and that WPL/HDR etc were able to leave the dirty work to Sterling, is correct, it would be a further good reason for the consortium to delay the point at which the next “buy in” (and presumably receipt of the big brown envelope) could be done with Sterling or whoever.

Obviously if the regime expects to do a runner with a big bag of cash it would pay WPL/HDR etc not to help them – giving them a clean nose to show the replacement regime in due course.
Regards to all on Hot Copper.