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Financial Times: Four overseas companies in Libya gas deal

By Dino Mahtani in London
Published: December 11 2007 02:00 | Last updated: December 11 2007 02:00

Just a handful of international energy groups have secured licences to develop Libya’s gas reserves in spite of high initial interest from dozens of companies.

Tight commercial terms and a lack of gas industry infrastructure in the North African country put off many of the 34 operating companies that qualified for the country’s first gas licensing auction.

Last weekend just four operators walked away with licences, including Russia’s state-owned gas company, Gazprom, and Algeria’s national oil company, Sonatrach. Shell, Europe’s largest integrated oil company, and PGNiG, Poland’s largest gas exploration and production company, took the other licences.

Bids from Occidental Petroleum of the US and Germany’s RWE are being considered for two more licences and they could be announced this week.

The relative lack of interest in the bidding round contrasts with the high interest oil and gas multinationals have shown in Libya since US-led sanctions began to be lifted in 2004.

The country, which has the largest oil reserves in Africa, is considered as relatively unexplored for gas. In oil licensing rounds after 2005, Libya received more than 230 bids from companies including ExxonMobil and Chevron of the US, but the government gradually tightened commercial terms in the new bidding.

Gas exploration and production is more capital- intensive, but the terms and conditions remained tight in the gas licensing round. Gazprom won its bid by promising to return 90 per cent of its future production to the government.

The results of the licensing round coincide with a series of renegotiations for contracts across Libya’s oil industry.

Yesterday Petro-Canada, one of Canada’s largest oil companies, said it had agreed to tighten the terms on its projects in Libya by promising a $7bn spending plan in exchange for renewing the projects on a 30-year term. Similar deals have been signed with Occidental, Austria’s OMV and Italy’s Eni in the past few weeks.

Talaat Barsoum, a geologist who has worked extensively in Libya, said government officials had told him that they were in “no hurry to loosen terms as the government is stuffed with money” due to the high oil price.

Some industry analysts say the low interest from many companies has allowed Sonatrach and Gazprom, two of Europe’s biggest suppliers of gas, to entrench their positions.

Copyright The Financial Times Limited 2007

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