TAIWAN BIDS ON LIBYAN OIL

UNCLAS AIT TAIPEI 004158

SIPDIS

SENSITIVE
SIPDIS

DOE/PI FOR R. PRICE

E.O. 12958: N/A
TAGS: ENRG EPET PREL LY TW
SUBJECT: TAIWAN BIDS ON LIBYAN OIL



1. (SBU) SUMMARY. According to local news reports Taiwan's state
owned China Petroleum Corp (CPC) sent its general manager
Chen Pao-lang November 21 on a 13-day fact-finding mission to
Libya to look at oil exploration and investment
opportunities. Following that, CPC announced Nov. 28 it was
bidding on oil concessions in Libya and would also conduct a
feasibility study on a petrochemicals complex to be built in
Libya. This will be Taiwan's first energy investment in the
Middle East and could reap great benefits to the energy-poor
island. END SUMMARY

LIBYAN OIL FOR THE HIGHEST BIDDER
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2. (SBU) Libya is rated as one of the five top oil and gas
exploration areas with discovered resources of more than 43
billion barrels of oil and an estimated 35 billion barrels in
reserves. Taiwan's president Chen Shui-bian made a
publicized stop-over in Libya on his return from a Latin
American trip in May 2005. During that trip it was announced
that Taiwan would set up representative offices with Libya, a
move that clearly indicated Taiwan's priority in establishing
some commercial connection with the oil-rich country.
Furthermore, Libya is not as dependent on financial aid as
the other African partners Taiwan has worked so hard to keep.

TAIWAN ASKED TO INVEST IN PETROCHEMICAL COMPLEX
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3. (SBU) CPC officials told AIT the oil concessions are in an area
outside of existing oil production fields which are run by
the oil majors, but is believed to hold rich oil reserves.
CPC officials did not want to divulge the extent of their
bidding only limiting to say that the bidding process is
ongoing (Note. according to news sources, CPC will submit
bids for one to three blocks before December 20. The
exploration and contract fee for each block is $4.2 million
to $5.2 million. Bid winners will be announced Dec. 20. End
note.). According to news sources, the Libyan government has
also invited CPC to invest in a petrochemical zone in Libya
and CPC will conduct a feasibility study. Officials at
Formosa Petrochemicals (FP) CPC's main competitor in the oil
and gas sector told AIT that they have not considered
investing in Libya because of the high risk and will only
consider joint ventures with one of the oil majors. (Note.
CPC is government owned and its main market is internal, FP
is privately owned and buys oil on the market and sells most
of its refined oil overseas. End note.)

COMMENT
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4. (SBU) Taiwan's CPC owns and operates four oil fields in
Indonesia, Ecuador and Venezuela and is exploring for oil in
Chad. While the latest bid on Libyan oil appears risky to
Taiwan's private-sector oil company, CPC may be trying to
diversify its oil sources to ensure a steady supply of oil
for Taiwan's increasing energy needs. As a state-owned
enterprise, CPC may also be influenced by Taiwan authorities'
interest in promoting ties with Libya. CPC's economic
interests are also served by the higher profit margins (up to
20 percent) available from operating its own fields versus
the 5-10 percent when buying on the open market. CPC is
likely to continue pursuing overseas oil exploration. END
COMMENT.

WANG