US producers in search of Libyan oil again

May 06, 2005 02:00 AM

US oil companies are wading back into Libya's oil sector after a long hiatus. But Libya's top diplomat in the United States says the Bush administration's reluctance to remove all sanctions is hampering this relationship.
Ali Aujali, who heads Tripoli's liaison office in Washington, urged participants at the Offshore Technology Conference to push for the elimination of the remaining legal impediments.
"We have to repair these relations," Aujali said.

Despite the difficulties, US oil companies are trying to pick up where they left off in 1986, when President Reagan ordered American companies to leave. Last June, the United States and Libya resumed diplomatic ties. Then three months later, President Bush signed an executive order rescinding most remaining sanctions.
Those actions were in response to Libyan leader Muammar Gaddafi’s decisions to compensate the families of those killed on Pan Am Flight 103 and give up his program to develop weapons of mass destruction.

But Libya remains on the State Department's list of countries accused of sponsoring state terrorism. And as a result, some export controls remain in place. The federal Overseas Private Investment Corp. still can't provide political risk insurance and project financing to companies wanting to do business there. And obtaining a visa is a long, cumbersome process.
"We feel the Americans don't trust the Libyans," Aujali said at a breakfast sponsored by the US Department of Commerce. Aujali added he feels "ashamed my country is still on that list, despite all that we did."

Houston-based ConocoPhillips and Marathon Oil, plus New York-based Amerada Hess, are resuming their partnership with Libyan National Oil Co. in a joint venture known as the Oasis or Waha Group. The partners had been granted rights to explore and develop an area covering some 13 mm acres. Its production is about 350,000 bpd, which is about a fifth of the nation's crude output.
Libya's total output is half of what is was back in the 1970s. In January, Libyan officials announced the results of a new licensing round. Los Angeles-based Occidental Petroleum, which had also worked in Libya previously, was the big winner, picking up nine blocks. The big surprise of that licensing round, noted Tony Mills, vice president of global consulting for Wood Mackenzie, was that the Europeans and the supermajors like ExxonMobil, Shell of Companies and BP were all shut out.

But the terms the Libyans are demanding are tough, and oil and natural gas prices will have to remain strong to make some projects worth the risks. While it may not have won a block in the licensing round, Shell announced its own deal with Libya's national oil company to rehabilitate an aging LNG plant, as well as explore for oil and gas in the hydrocarbons rich Sirte Basin.
"The future is bright," Mills said. "There are lots of oil and gas reserves to go for."
But companies should have no illusions.
"You won't find everything will be smooth and easy," Aujali said. "You've been away for a long time."

Source: Houston Chronicle
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