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The Wall Street Journal: BP’s Libya Gas-Exploration Deal Boosts New Chief

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By CHIP CUMMINS
May 30, 2007; Page A10

LONDON — BP PLC and the Libyan government of Col. Moammar Gadhafi agreed to a $900 million natural-gas exploration deal that provides a boost to the British energy company’s new chief executive as he struggles to lead BP through a series of greater challenges in the U.S. and Russia.
 
The deal could be a way to increase BP’s reserve base as it and other big energy producers scramble to gain access to oil and gas reserves around the world. It also reopens a historic exploration frontier for BP, which left Libya in 1971 after Col. Gadhafi nationalized the company’s operations there.

The deal is a personal triumph for BP CEO Tony Hayward. He pushed 18 months of difficult negotiations with Libyan officials while he was the company’s head of exploration and production. Earlier this month, he took over as CEO when longtime boss John Browne unexpectedly resigned after admitting he lied to a court to derail a newspaper story about his personal life.

Mr. Hayward and BP Chairman Peter Sutherland were in Libya yesterday for the signing ceremony, coinciding with a visit by outgoing British Prime Minister Tony Blair. One BP official said while initial investment for BP is set at about $900 million, the company is likely to put as much as $2 billion into the project during the coming years. BP said the deal was its biggest exploration commitment ever.
 
Mr. Hayward’s success in Libya contrasts with lingering problems elsewhere. In the U.S., federal authorities are investigating a big refinery explosion in March 2005, alleged improper energy-market trading and spills and corrosion at BP’s Prudhoe Bay oil field. BP says it is cooperating with all probes.

At the same time, Mr. Hayward faces tricky negotiations with Russian authorities, who have signaled that they will try to wrest control of a gas field now in the hands of a BP joint venture called TNK-BP.

The Libyan deal isn’t part of a series of oil-rights auctions that other energy companies have rushed into after U.S. and European governments eased sanctions against Col. Gadhafi’s regime in 2004.

Shortly after the thaw, BP rival Royal Dutch Shell PLC signed a similar gas-exploration deal with Libyan officials.

BP said it and Libyan partners will explore about 21,600 square miles — both onshore and offshore — an area BP said was equivalent to more than 10 of the deepwater blocks the company operates in Angola.

Write to Chip Cummins at [email protected]

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