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Bloomberg: Tatneft, Gazprom Top Exxon for Libyan Drilling Rights (Update2)

By Maher Chmaytelli

Dec. 20 (Bloomberg) — OAO Gazprom, the world’s largest natural-gas producer, and another Russian company, OAO Tatneft, secured oil-drilling rights in Libya, beating offers from the largest U.S. and European oil companies, Exxon Mobil Corp. and Royal Dutch Shell Plc.

Libya, holder of Africa’s largest crude-oil reserves, will offer more plots for exploration before April, said Shokri Ghanem chairman of state-owned National Oil Corp. Tatneft was awarded rights in three of 14 plots offered at an auction today in Tripoli. Gazprom secured one, offering to keep only 10 percent of the production of any field, while Exxon wanted 24.9 percent.

“We’re very satisfied,” Ghanem said in an interview after the auction. “Getting a 90 percent stake in an offshore area is very good.”

A joint venture between Petro-Canada and Repsol YPF SA of Spain secured a plot, as did Chinese Petroleum Corp. of Taiwan and Wintershall AG of Germany. Four plots had no bidders because they’re located in regions that aren’t producing oil. Three received single bids that National Oil will decide in a week whether to accept. Exxon is a single bidder in a neighboring one.

The North African state is stepping up exploration after oil prices doubled to more than $60 a barrel in three years, driven by higher consumption in China and India, and falling reserves in the U.S. and Europe.

Fewer Bidders

A total of 23 companies, including Chevron Corp., Total SA, Eni Spa, RWE-DEA AG and Gaz de France made bids. That’s about half the bidders in the two previous auctions in January and October 2005.

“There are fewer competitors in this auction because several plots are in areas that aren’t oil producing,” Arihiro Kezuka, general manager for the Middle East at Inpex Holdings Inc., Japan’s biggest oil explorer, said in an interview before the auction.

Libya, a member of the Organization of Petroleum Exporting Countries, has awarded almost 50 oil-search permits in two years as it seeks to make up for the losses caused by sanctions imposed from 1986 to 2004 by the U.S. The sanctions were because of accusations that Muammar al-Qaddafi’s regime was sponsoring terrorism.

The U.S. lifted the sanctions after Libya agreed in 2003 to pay $2.7 billion to the families of those killed in the 1988 bombing of a PanAm plane over Scotland, and to end programs to develop weapons of mass destruction.

The curbs caused Libya’s oil output to fall, strangling the economy in a nation where petroleum sales make up 95 percent of its hard currency earnings.

`Good Quality Oil’

Libya, slightly bigger than Alaska, has proven crude-oil reserves of 39 billion barrels, equal to more than five years of U.S. consumption. National Oil estimates potential reserves may be triple that amount, as only a quarter of Libya’s territory is covered by agreements with oil companies.

“Libya will remain a focus for oil companies for the foreseeable future,” said Francis Perrin, analyst at the Paris- based Arab Petroleum Research Center. “It has good quality oil, easy to refine, it is close to Europe and its territory is largely unexplored.”

Libya dismissed concern that the death sentence of five Bulgarian nurses and a Palestinian doctor by a Tripoli court yesterday would threaten the development of its oil industry after two decades of U.S. and international sanctions.

The death sentence, given because of accusations that the health workers infected hundreds of Libyan children with HIV virus, “shouldn’t have an impact. Tt is strictly a judicial matter,” Ghanem said.

To contact the reporter on this story: Maher Chmaytelli in Tripoli at [email protected]

Last Updated: December 20, 2006 14:10 EST

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