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U.S. Oil Concerns Are Lining Up To Bid on Rights for Libyan Crude

THE WALL STREET JOURNAL: U.S. Oil Concerns Are Lining Up To Bid on Rights for Libyan Crude

“But National Oil Corp. has yet to firm up a deal with Royal Dutch/Shell Group after signing a preliminary agreement in March”

By KAREN MATUSIC

DOW JONES NEWSWIRES

August 18, 2004; Page A2

WASHINGTON — U.S. oil companies keen to get their first chance to do business in Libya in 18 years are expected to be active participants in the former pariah state’s first post-sanctions licensing round.

Given soaring crude-oil prices and the likelihood Iraq will be off limits to foreign oil companies until the violence subsides and an elected government is installed, interest in the Libyan round will be high, industry executives said.

The high quality of Libya’s light, sweet crude, ideal for gasoline production, and the relatively quick travel time to the U.S. adds to the attraction.

“I expect a high amount of interest from the U.S. industry from both large and small companies,” said Stephen Davis, co-director of the Middle East and North Africa section of Vinson & Elkins LLP, a law firm that advises oil companies on Libya. “They will certainly want to be able to understand the process and approach of the Libyans, even if they are not interested in this particular licensing round.”

The two biggest U.S. oil companies, Exxon Mobil Corp. and ChevronTexaco Corp., say they are interested in pursuing opportunities in the Organization of Petroleum Exporting Countries member state, while smaller U.S. rivals Marathon Oil Corp., Amerada Hess Corp. and ConocoPhillips, the so-called Oasis Group, are in talks with Libya to resume operations they were forced to abandon in 1986.

Monday, Libya’s National Oil Corp. launched its delayed EPSA-4 oil and natural-gas licensing round for 15 exploration areas, more than the eight announced earlier this year. The licensing round originally was expected to be opened in July. National Oil Corp. said it would open final bids and make awards Jan. 10.

The bidding will be based on two numbers: the percentage share of production the bidder offers to National Oil Corp. and the signing bonus the bidder is prepared to pay, a Libyan oil-company official said. National Oil Corp. plans a roadshow with technical and contractual details Sept. 5 in Tripoli and Sept. 14 in London. A data room will be set up at the oil company’s headquarters in Tripoli Oct. 20-29 for companies that prequalify. Companies already operating in Libya will be exempt from qualification requirements.

“We are very interested in any suitable opportunity that might present itself in Libya,” said Andy Norman, a spokesman for ChevronTexaco, of San Ramon, Calif.

Exxon Mobil, of Irving, Texas, “will pursue any profitable opportunities that arise in Libya, as we do in other countries,” company spokeswoman Susan Reeve said.

In addition to its continuing discussions as part of the Oasis Group, Marathon, of Houston, is keen to participate in the tender, spokesman Paul Weeditz said. “We are certainly interested in exploring opportunities in Libya that might provide a good fit for us,” Mr. Weeditz said.

Occidental Petroleum Corp., which was producing about 45,000 barrels a day in Libya when it left in 1986, is also discussing its return. National Oil sources said the Los Angeles company stands the best chance of being the first U.S. company back in business in Libya. “We plan to participate in the tender,” Occidental spokesman Larry Meriage said.

Smaller independent producers such as Apache Corp., of Houston, and Anadarko Petroleum Corp., The Woodlands, Texas, which both have other North African oil and gas operations, may also be interested in EPSA-4. Libya “certainly meets a lot of the criteria we would have, and we do have a base in Egypt,” Apache spokesman Tony Lentini said, adding that it was company policy to decline further comment on pending bid rounds.

Another 13 U.S. oil companies have formed a consortium to look for oil and gas opportunities in Libya, said Houston American Energy Corp., one of the participants.

Consultants note exploration activities in Libya during the past three decades have been disappointing. Companies exploring for oil in Libya since the 1970s haven’t been the “household names” one usually associates with success at the drill bit, energy consultant Matt Simmons said.

Mr. Simmons and others said Libya’s focus should be on natural gas, a suggestion not lost on the National Oil Corp. official, who said Libya was keen to beef up its gas exploitation. But National Oil Corp. has yet to firm up a deal with Royal Dutch/Shell Group after signing a preliminary agreement in March for an integrated liquefied natural-gas venture. Shell said yesterday it is too soon to say whether it will bid for acreage in EPSA-4.

“Like all oil companies, we would be interested in looking at any bidding round to acquire exploration acreage,” a Shell spokesman in London said. “But, as this has just been announced, we will need to evaluate what is on offer first before we decide to make any bid.”

—- Shai Oster in London and John Biers in Houston contributed to this article.

Write to Karen Matusic at [email protected]

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