MarketWatch: Libya oil chief signals pick up in gas deals

By Adam Smallman
Last Update: 7:41 AM ET Jun 27, 2007

VIENNA (MarketWatch) — The pace of gas deals in one-time pariah state Libya is to accelerate in early July when around 15 onshore and offshore areas are to go under the hammer.

The move by the Libyan government is attracting companies of the caliber of Italy’s Eni SpA, which has said it will bid for rights for the field, and comes just weeks after the country struck a huge deal with BP PLC to search for gas in its northwestern quarter.

The head of Libyan oil policy and National Oil Co. Chief Executive Shokri Ghanem told Dow Jones Newswires in an interview Friday that its third hydrocarbon round since U.N sanctions against it were ended in September 2003 was on track.

“That announcement will come in July,” he said, possibly within the first week.
Separately, he also raised concerns about the accuracy of key oil data issued by the International Energy Agency, the energy watchdog for major consuming nations.

Behind the flurry of gas deals, which includes Royal Dutch Shell PLC driving ahead with its search for gas and associated liquefied natural gas investments in the country, is a combination of a pressing need for gas to feed power plants, cement factories and petrochemical projects, and hungry export markets.

“We are moving to gas for domestic use,” Ghanem, a former prime minister of the country, said. “We’re converting our power plants to gas-fired.”

However, the majority of the gas produced will be exported through pipelines to southern Europe and in cooled, liquid form by ship.

“We’re already exporting about 10 billion cubic meters a year,” he said. “We have many fields to develop with gas.”

The country remains in the grip of autocratic leader Moammar Gadhafi, yet it is gradually re-engaging with the world community despite hiccups along the way.

Eni’s Chief Executive Paolo Scaroni, already interested in bidding for gas acreage in the upcoming round, met with Ghanem in Vienna last Wednesday.

BP last month signed a seven-year agreement, committing to invest at least $900 million which officials have indicated may evolve into $25 billion in the coming years.

Ghanem also said that Shell had committed to “at least one” LNG project on the coast at Ras Lanuf, home to a Dow Chemical Co. (DOW : The Dow Chemical

5:53pm 06/27/2007

DOW44.56, -0.07, -0.2%) petrochemical joint venture with Libya’s National Oil Co., assuming it too finds gas under a deal inked in 2005.

Three years ago Shell signed an agreement with Libya to develop its gas industry and upgrade its Marsa el Brega LNG terminal, east of Ras Lanuf. Drilling for gas is due to start in the second half of this year.

Blame The IEA

In the interview, Ghanem, who represents his country at ministerial meetings of the Organization of Petroleum Exporting Countries, also wheeled out a new culprit he blamed for higher oil prices – the International Energy Agency.

He said the agency, which monitors energy security for wealthy Organization For Economic Co-operation and Development member countries, is responsible for adding up to $3 a barrel to the price of oil, which Tuesday traded around $68 a barrel in New York.

“The IEA is always creating confusion in the market,” Ghanem said, citing its widely read monthly oil market reports that assesses the latest global oil and fuel supply picture.

The agency sharply revised up its estimate of world oil demand this year in its latest report, which is a regular target for some energy analysts over what they say is its overly optimistic assessment of oil supply from non-OPEC producers.

“At the beginning of the year, they will put the demand down and the supply up,” Ghanem said. “Then every month they make the supply lower and the demand up.”
He said he didn’t think the IEA was manipulating its data but suggested the agency suffered from “maybe wishful thinking.”

Lawrence Eagles, editor of the agency’s report, said: “Certainly at the moment we’re revising supply down…forecasts by their very nature always have to be revised as better data becomes available.”

He added: “The IEA and the OPEC Secretariat are working very hard to fill in gaps in our knowledge.”

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