Libya’s oil industry and Wikileaks…

Of the over 7,000 State Department cables devoted to the oil industry, global there are dozens from the embassy in Tripoli that relate the comings and goings of the oil companies and the Gaddafi regime in the last few years. It’s an incredible series of stories, manouverings and large scale theft. Here is our very rough draft summary of the Libyan oil cables…

Feb 11, 2010
Ghanem rebuked Libyan government officials who spend a lot of money when prices are high; there needs to be a long-term view! Libya has 2 million bpd capacity but is only producing 1.5 mbpd in accordance with OPEC quotas. NOC was supposed to fund expatriates to be seconded to SOEs – not many had been approved, and Ghanem was saying NOC would pay $10k for an Indian or a Brazilian, not $100k for an American. Why are 76% of jobs by foreigners? He understood when it came to recent technologies such as EOR and CO2 injection; IOCs unhappy about water fees since their agreements stipulate free access to water needed for injection; Ghanem counters by saying water access is dealt with in the Petroleum Law (1955?); charges compared to how brackish the water is; Ghanem says Repsol has paid, others say no company has paid; others say the NOC partner has paid the water bill for the IOC partners and is expecting to be reimbursed; Ghanem says his long term plan is to convert all agreements to EPSAs – so far Wintershall and the Waha Group are outside it; his hope would be to convert the NOC to a joint stock company which pays taxes to the government like the Waha group does – he has already removed NOC employees from government status giving more freedom to manage conditions; GOL dragged out the sale of Verenex, which meant that the share price dropped 30% – the NOC would have honoured its commitment to match the CNPC price but it couldn’t so eventually LIA bought it in a fire sale. Had an extended break to “catch up on movies, read books, and rest.”

October 27, 2009
Petrocanada threatened with nationalisation then told to cut production by 50% because Gaddafi would not see Canadian PM Harper on stop over through to NYC and was issued tourist visa. Wintershall also told to cut production by 15% while they were in renegotiation of their EPSA IV. The government claimed this was to fall in line with OPEC quotas but nobody believed them. Meanwhile, the Waha Group (including Marathon, Amerada Hess and Conoco) was encouraged to produce “unrestricted”. A Petrocanada executive that as well as pressuring some companies, the Libyans were also testing actual production capacity at Waha.

Shukri Ghanem returns. Reportedly left because of attempts by Khamis to extort oil liftings; dispute with Mahmoudi al-Baghdadi over sale of land to Qatar; and abduction of one of his NOC employees as part of a turf war. Waha head described it as “his extended holiday”. Ghanem’s return linked to rise in fortunes of Saif al-Islam again. Did he mishandle Verenex and making the companies pay for the terrorism fund?

Sept 27, 2009
Canadian ambassador reports chaos on Gaddafi visit; 130 Libyans had to be granted by the Canadian visa in NYC quickly – did so on the basis that USG had already vetted them; The British ambassador was suggesting solidarity; originally the Canadian govt had said Gaddafi wasn’t welcome but then the Canadian companies lobbied them not to say that;

Sept 20, 2009
Ali Sugheir: keen to increase gas capacity through Greenstream. Mellitah, joint venture with Eni, exports 8 billion cubic metres a year and 2 billion for domestic; he’d like to increase that by 3 billion cubic metres. Mellita also produces 420 kbpd – Eni gets 12% of the oil and 40% of the gas; 25 million cubic metres flared over last 20 years – per year? Billion cubic metres? Claims that recent EPSAs would naturally take time to find more oil; Waha Group had new discovery; manager at Total alleges that the NOC decreed a 100 kbpd increase in production in the run-up to September 2009 for Gaddafi’s 40th anniversary in power;

June 4, 2009
Renegotiation completed with Total; others had already been negotiated with Repsol, Oxy, Eni and Petro-Canada in June-July 2008; cut in production; they paid $5.4 billion cumulatively as “signing bonuses” on deals they already had; one of the producing areas is al-Jurf where Saif al-Islam is supposed to have liftings – but unclear whether this is from the Total or NOC cut; Jurf has 45,000 bpd Total’s share down to 20.25% and consortium to 27% from 50%… (is it easier to lift from the offshore fields? Also, what are Saif al-Islam’s ties to French business and political leaders?)

April 15, 2009
Verenex sale to CNPC blocked; they found 2.15 billion barrels and due to produce 50 kbpd by early 2011; NOC can pre-empt sale of Libyan assets, not of the company as a whole; CNPC sale worth about $400 million but NOC pressured them to pay a $40 million “bonus”;

April 9, 209
Muatasim due to go to the States, as Saif had in 2008;

Feb 4, 2009
All IOCs being pressured to contribute to the U.S.-Libya Comprehensive Claims Settlement Fund. GOL supposed to put $1.5 billion in, pressure believed to be related to the fact that the government was due to present a reduced budget to the GPC. Ghanem said the GPC expected the IOCs to contribute and if not they would be compelled to re-consider their relationships. Ghanem supposed to have got Italian citizenship (he eventually fled there in July 2011); the market oriented compared to some of the other NOC managers who are more nationalistic; Gaddafi himself had mentioned in a video link-up with Georgetown Uni students Jan 21st 2009 that Libya could slow production or re-nationalise.

December 1, 2008
Take out of Ghanem as mercurial, cliquish, ignorant and arrogant;

NOC has only 700 employees to manage the whole sector; (yet Petro-Canada seems to have 255, including 100 expats);

“the NOC’s organizational chart has gone through several dramatic evolutions in recent years”; gsa merged with investment; NOC launched three training programs of its own to respond to human resource shortages: petroleum engineering; geology & geophysics; and accounting. Several hundred supposedly passed through there; but still bottlenecks in English & IT; the NOC were pressuring the IOCs to accept graduates of these programs sight unseen;

Nov 6, 2008
Gaddafi’s five day trip to Russia, Belarus and Ukraine (first since 1985); Ghanem accompanies; Russia had been interested in an OPEC for gas – Russia, Libya, Qatar and Iran; but all they got was agreement to negotiate three-way between NOC, Eni and Gazprom;

Sept 22, 2008
RWE made more discoveries (a total of seven to date) from its 2003 EPSA III agreement in Sirte Basin. 32% share.

Sept 2, 2008
Ghanem announces the launch of a third private company, out of restructuring of al Braiga Marketing Company; but Braiga continues; the three are al-Rahila, al-Sharara and the Libyan Company for Distribution of Petroleum Products; al-Rahila capitalised at 50 million Libyan dinars and owns 106 gas stations, plans to build eight more;

August 12, 2008
Mariner for Maritime Transportation, Ltd owned by Hannibal Gaddafi; linked somehow to the state company General National Maritime Transportation Company (GNMTC); Mariner started in 2000 in Cyprus, then merged with “unnamed” Libyan company; acted as a broker between the NOC and European shipping firms for offshore liftings; then it started to charter directly; by 2003 it had bought two offshore oil product storage vessels and used them to service fields operated by Total and Eni; The company now has three major areas of operation: offshore oil/gas platform support, shipping management and clean (i.e., refined) oil product transportation from Libya to foreign ports; supplied 75% of NOC needs to ship products to Europe; no competition but does compete with French and Italian ships on rig support; and with Cypriot vessels on oil transportation; use of Malta for refurbishment but Maltese rivals limited because they do not own their own vessels; Mariner is a private company that uses foreign banks for loans; but other sources say NOC supporting as late as 2006; as far as GNMTC goes, according to its website it has a fleet of five crude oil, three “clean product” and two liquid petroleum gas (LPG) tankers in its fleet. GNMTC’s operating capital was recently expanded to 600 million Libyan dinars (about $480 million), in addition to a new government-backed loan for $350 million to purchase an additional nine tankers. Opposition websites document alleged instances in which Hannibal has used his influence over the GNMTC to establish himself up as a broker for the purchase of vessels, thereby reaping millions of dollars worth of personal profit.

July 23, 2008
The renegotiation of Repsol, Saga, OMV and others – invvolving a cut in production share, over a billion dollars signing, and some $4 billion plus investment in NC115 and NC 186 where proven reserves end 2007 were over 765 million barrels; NC115 consortium share cut to 13% form 25% and NC186 to 12% from 40%;

July 13, 2008
Ghanem under pressure to find $1.2 billion for Muatasim for new security units and upgrades related to his job as national security advisor; “The reported attempts by al-Qadhafi’s sons to use the NOC as a personal bank, together with Ghanem’s pessimism about the prospects for meaningful reform, suggest that the regime remains unchanged with respect to the way it conducts key elements of its business.”

July 13, 2008
Occidental renegotiation – $1 billion signing, plus $2.5 billion investment agreement (matched by the NOC); 400 wells, with 12-15 rigs in country conntinuously; the renegotiation also meant a weakening of ties with the local operating partner Zuweitina; now development plans have to be agreed directly with the NOC; the idea here is that the regional companies are more stick in the mud than the NOC, which wants aggressive expansion and will fund itself; anti-corruption provisions designed to cut out state companies from influenccing on tendering which will be run by Joint Project teams; booked reserves drop to 10-12% from 20%; increases the profile of the NOC but relies heavily on their investment yet they are subject to massively political decisions; their own budget for the year was only finally approved in June and then contained only flatline spending; so will they face issues over real investment needed to make EOR and IOR effective? Some suggestion of getting everyone into the EPSA Ivs to deal with the NOCs own decreasing capacity; also, the Waha group producing 350,000 barrels a day came back in in 2005 with a $1.8 billion payment for their former acreage after two years negotiation; Differences in the positions of the companies; for example, in Waha, Marathon relies heavily on Libya for booked reserves whereas CP has much greater worldwide access; (contains a lot of the new shares for the companies)

July 3, 2008
Long meeting with Shukri Ghanem, in the course of which he threatens to cut production in response to a US court ruling against Libya for $6 billion and a so-called NOPEC law going through Congress to punish cartels… and also says he was US educated, has “a soft spot” for US oil companies and expects them to continue to do well in EPSA bids. Some sensitivity around DePSA – EOR and IOR of existing fields run solely by the Libyan companies? He needs the cover of GPC approval.

June 24, 2008

Petrocanada renegotiated the deal… from 2015 to 2038; paid $1 billion up front; $3.5 billion in the redevelopment of several large producing fields, and $460 million in oil and gas exploration – to pay 100% of exploration and 50% of development costs; had to accept 12% share of all six agreements, hoping to double its production to 200 kbpd in the next 5-7 years (that would equal $7 billion turnover, of which they would get $700 million or so);

May 7, 2008

Accident at al-Jurf about 100k off the coast in 90 metres of water; a drill seems to have crashed into a production well; Jurf was producing 45,000 barrels a day out of 10 produciton wells which are all fed to one offshore storage vessel (what allows the Saif liftings?); Total have 37.%, Wintershall 12.5% through its local operating company Mabruk Oil Operations;

December 2007

Results announced of the fourth EPSA IV round since 20004 and the first one for gas. Twelve blocks were offered, ten were bid on, two were sole bids. Four large blocks awarded: Gazprom (9.8%), Shell (15%), Sonatrach (13%) and Polskie (11.8%). Shell had the highest share (13%) and the only bidding bonus (which was heavily weighted in the auction); 38 companies pre-qualified and 18 ended up bidding; Ghanem said he was disappointed; gas prices lower, pricing mor difficult and uncertainty about rights to oil discovered while looking for gas; while EPSA bids go to the highest bidder, reftel refers to non-EPSA contracts negotiated with BP and ExxonMobil (though I does not say for what).

November 2007

Problems are: lack of Libyan expertise, which seemed to have left for the Gulf when it could in the Noughties; the IOCs then becamse subject to a two percent stamp tax that they had fought off in the past; the NOC had acted as arbitrator to the tax authorities before that but bowed out; IOCs say Libyans harder to train because of English and IT than in most other places around the world; margins are so thin that one company says it makes as much money out of Libya as out of a neighbouring country where it produces a quarter of what it does in Libya (but thatt’s not necessarily a sign of company effort); two-week business visas renewed twice, not residence visas; swapping the PC arrangements of Libyans by getting expats over them but disguising them; the NOC disallowed the servicing of offshore contracts from Malta, saying they had to rebase onshore support into Libya; Waha can’t hire expats – had over 100 positions open, a third of its expat requirements; also Law 43 of 2006 specified that two Libyan state firms which had done procurement for the Libyan state firms in London (Umm Jawaby) and Dusseldorf (Medoil) were to be rebased in Libya – 200 staff moved and a lot of logistical lines confused.

November 20, 2007

ExxonMobil awarded Area 21 without a signing bonus and on less onerous conditions than in the EPSA IV (when they had paid a $10 million signing bonus); also Area 44 near the Egyptian border;

November 15, 2007

Resource nationalism… of course! Rising prices and many foreign companies; the argument of the Western companies is that they need more investment and technology to really up production and what they will get instead is under-performance and under-production; Shell, BP and Eni were supposed to have got deals outside the EPSA framework;

October 27, 2007

Eni announced a bilateral deal for $14 billion investment in fields until the 2040s and $800 million in exploration (like the $900 million by BP announced in May); Could double Libya’s gas export capacity to 16 billion cubic metres; new LNG facility at Mellita; out of a concession where they had to pay taxes and royalties now NOC pays for them – but they get put down to small PSA; has to pay a $1 billion bonus and retire a $500 million debt to the NOC;

Oct 19, 2006

A new National Energy Council comprising Ghanem, the PM and five ministers is consultative. GOL plans to increase production to three million bpd by 2010 – resting somewhat on new areas but more on EOR and IOR within existing fields; Ghanem got mad about the “Libya Oil and Gas Show” and said they were money making ventures by individuals touting influence with the regime;

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