Bloomberg: BP Will Share Oil, Gas Discoveries With Libya, Ghanem Says

By Maher Chmaytelli

June 22 (Bloomberg) — BP Plc, Europe’s second-largest petroleum company, and the Libyan government will share any oil fields BP may find under an exploration accord signed with the North African nation last month, a Libyan official said.

The agreement was initially announced as a “natural-gas cooperation accord” during British Prime Minister Tony Blair’s visit to Libya on May 29. London-based BP committed to spend at least $900 million on exploration works in offshore and onshore plots that cover a total of 54,000 square kilometers (20,850 square miles), about the size of West Virginia.

“We called it a `gas accord’ because BP will be exploring in gas-prone areas,” said Shokri Ghanem, chairman of state-run National Oil Corp., in an interview yesterday in Vienna. “Whether it finds oil or gas, it will have to share any discovery.”

Libya holds Africa’s largest crude oil reserves. It has stepped up exploration with the help of foreign oil companies since 2004, when nearly two decades of U.S. sanctions were lifted. The sanctions had been imposed because of accusations that the country supported terrorism.

Under the agreement with BP, the Libyan government will have a 77.5 percent stake in any field found, BP 19.125 percent and the state-owned Libya Investment Corp. 3.375 percent, Ghanem said. That proportion applies to oil and gas fields, he said.

OPEC Limits

Libya’s oil production capacity has risen to 1.8 million barrels a day from 1.5 million barrels a day in 2003, according to BP. It is producing below capacity, at 1.69 million barrels a day, in accordance with a decision by the Organization of Petroleum Producing Countries to reduce output so that crude oil prices stay above $60 a barrel.

The country aims to reach 2 million barrels a day by the end of this year and 3 million barrels a day by 2012, Ghanem said. “We also have the potential to become a big player in natural gas,” he said.

Next month, the nation will invite oil companies to bid for exploration licenses in gas-prone areas, Ghanem said. The talks with BP about the agreement started two years ago, before Libya decided to hold an auction for gas drilling rights.

Since the international sanctions were lifted, Libya has held three exploration rounds, all in oil-prone areas. Relations with the U.S. and the U.K. began warming after the government of Muammar al-Qaddafi, the nation’s ruler since 1969, agreed to pay compensation to the families of 270 people killed in the 1988 bombing of a PanAm plane over Lockerbie, Scotland. Qaddafi also agreed to give up weapons of mass destruction.

Liquefied Gas

Libya’s gas reserves of 52 trillion cubic feet are the fourth-largest in Africa, after Nigeria, Algeria and Egypt, according to BP. It produces about 12 billion cubic meters of gas a year, 8 billion cubic meters of which is exported to Italy by a sub-sea pipeline that opened in 2004. Less than 1 billion cubic meters is liquefied and sent to Spain on tankers. The rest is consumed locally.

Finding more gas may allow BP or Royal Dutch Shell Plc to build a new plant for liquefied natural gas. LNG is gas cooled to a liquid so it can be shipped by tankers to places not linked by pipelines.

In 2005, Libya selected Shell as a partner to refurbish its LNG plant in Marsa Al-Brega, in the center of the country, and to increase its output from 700,000 tons a year to 3.2 million tons a year. Shell, which will spend as much as $450 million on the project, said the contract also provided the possibility of another LNG plant if enough gas was found.

To contact the reporter on this story: Maher Chmaytelli in Vienna, at [email protected] .
Last Updated: June 22, 2007 03:13 EDT

 

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