Identifier
Created
Classification
Origin
04TRIPOLI28
2004-12-14 09:49:00
CONFIDENTIAL
Embassy Tripoli
Cable title:  

(C) U.S. OIL COMPANIES PERSEVERE IN LIBYA

Tags:  EPET ECON PREL LY 
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O 140949Z DEC 04
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AMEMBASSY LONDON IMMEDIATE 
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C O N F I D E N T I A L TRIPOLI 000028 


LONDON FOR GOLDRICH
PARIS FOR ZEYA

E.O. 12958: DECL: 12/12/2014
TAGS: EPET ECON PREL LY
SUBJECT: (C) U.S. OIL COMPANIES PERSEVERE IN LIBYA

REF: TRIPOLI 0026


C O N F I D E N T I A L TRIPOLI 000028


LONDON FOR GOLDRICH
PARIS FOR ZEYA

E.O. 12958: DECL: 12/12/2014
TAGS: EPET ECON PREL LY
SUBJECT: (C) U.S. OIL COMPANIES PERSEVERE IN LIBYA

REF: TRIPOLI 0026



1. (C) Oasis/Oxy Update: The oil majors were in Tripoli the
week of December 6 for yet another Libyan economic conference
(reftel). The former Oasis partners (Marathon, Amerada Hess,
ConocoPhillips) are continuing their negotiations with the NOC
for re-entry into the Libyan oil market, as is Occidental.
ConocoPhillips told us that they have initialed an agreement
with the Libyans for re-entry to the Libyan oil market based on
the arrangement they had before pulling out in 1986. Conoco
characterized the agreement as "not good," but said the company
views it as "dues-paying" in order to return to the Libyan
market. Occidental, on the other hand, seems to be hanging
tougher with the Libyans. In a November meeting in Libya,
Occidental CEO Ray Irani told Libyan PM Shukri Ghanem that the
agreement proposed by the Libyans would cost Occidental USD 200
million, something he could not justify to the shareholders.
Occidental has offered an alternative to the Libyans; although
it has received no response so far, Oxy seems willing to wait it
out for a while. Marathon, like ConocoPhillips, appears more
willing to pay a price for re-entry into the Libyan oil market.


2. (C) EPSA IV Update: Meanwhile, American and non-American
oil companies are awaiting the results of the first EPSA IV bid
round. Winning bids are supposed to be announced on January 19,
but there are rumors that the announcement could be delayed
(NFI). Tariq Hassan-Beck, director of planning for the National
Oil Company (NOC),has said publicly that the NOC is already
working on the round two bidding package, which could take place
in the first half of 2005. "We're learning from round one," he
commented; but provided no details. Shortly thereafter, Poe
Legette, partner, described some of the legal problems
encountered in the EPSA IV process, including the fact that
contracts must be approved by the General People's Committee and
overall uncertainty about which laws apply under which
circumstances.


3. (C) Azzam Messalatti, chairman of the NOC's upstream
negotiation committee, mentioned that the NOC is also working on
Development and Production Sharing Agreements (DPSAs) which
would be similar to the EPSAs, but focused on development rather
than exploration. This is the first that we and some of the
American companies have heard of this. Messalatti also briefly
mentioned a Libyan "Gas Master Plan," which he said has been
approved in response to an increase in demand for natural gas.
The plan includes upgrading facilities and developing fields.


4. (C) COMMENT: The U.S. oil companies are clearly looking at
Libya as a place where they expect to be doing business in the
future. ConocoPhillips already has an office here; Amerada
Hess, Chevron-Texaco, and Exxon-Mobil are all in the process of
signing leases for office space in downtown Tripoli and are
bringing in country managers for Libya. Some of the U.S. oil
companies commented privately (as they have in the past) that
it's not clear that the way the EPSA IV round was run will
result in the best foreign partners for Libya. According to
them, the process doesn't really allow for consideration of the
bidder's experience and quality of technology. The only time
such factors could have been considered was in the qualifying
round, but given that 68 out of 120 companies qualified, some
companies wonder how much weight was given to those aspects of
the bidding process. Of course, the U.S. companies have a
personal interest in cutting down the amount of competition, and
their edge is clearly in the experience and technology they can
bring to development of Libyan oil fields, not necessarily in
being the ones offering the sweetest financial deal to the GOL.
END COMMENT.


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