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 -------------- ¶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 -------------- -- ¶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 -------------- ¶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