LIBYAN NOC CHAIRMAN GHANEM'S VIEWS ON PETROLEUM ISSUES

C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000600 SIPDIS DEPARTMENT FOR NEA/MAG, COMMERCE FOR MASON, ENERGY FOR PERSONS E.O. 12958: DECL: 10/19/2016 TAGS: ECON EINV ENRG EPET PREL LY SUBJECT: LIBYAN NOC CHAIRMAN GHANEM'S VIEWS ON PETROLEUM ISSUES CLASSIFIED BY: Ethan Goldrich, CDA, Embassy Tripoli, State. REASON: 1.4 (b),(d) ¶1. (C) Summary: Charge met with National Oil Corporation (NOC) Chairman (and former Prime Minister) Shukri Ghanem on October 15 to discuss US-Libyan energy sector cooperation. Ghanem expressed confidence in Libyan efforts to boost oil production and defended the establishment of the Cabinet-level National Energy Committee over the NOC. End Summary. ¶2. (C) Charge congratulated National Oil Company Chairman Shukri Ghanem on receiving the "Petroleum Executive of the Year" award at the 27th annual Oil and Money conference in London on September 18-19. Responding to the Charge's comments on his acceptance speech, "The End of Cheap Oil," Ghanem wryly noted that although oil prices have rebounded recently, he did not expect that trend to continue for long. In the near term, prices should dip following the announcement of a one million bbl/day OPEC production cut, the expected result from OPEC's October 19 meeting in Doha. Ghanem lamented the difficulty of accurately predicting fluctuations in world oil prices, and estimated that roughly $10-15 of the cost of a barrel of oil stems solely from market apprehension about war and political instability in the Middle East region. -------------- Meeting Libyan Production Goals -------------- ¶3. (C) When asked for an update on Libya's efforts to boost petroleum production to three million bbl/day by 2010, Ghanem expressed optimism that this figure could be met on this timeline through the continued implementation of the NOC's two-prong plan. The first is the recent opening of Libya to exploration by foreign oil companies. Although the most recent concession awards will take 6-8 years to produce oil in quantity (if a sizable find is made),other new areas are due to come on-line in the next three years. The second, and likely more important factor for production increases in the short-term, will be the enhanced and improved oil recovery (EOR, IOR) operations being undertaken at Libya's mature fields. Ghanem stressed that the return of U.S. companies and expertise will be vital to this effort. ¶4. (C) Ghanem expressed satisfaction at the progress of the latest round of Exploration and Production Sharing Agreements (EPSA). The NOC's review of 70 applying companies produced a list of 47 qualified bidders who will have the opportunity to bid on concession rights in 12 offshore blocks and 29 onshore areas. Multiple bids are expected from most of the qualified companies, so the total number of bids should number well over ¶100. Ghanem noted that oil company interest in Libya remains high, owing to its vast proven and potential reserves, past production history and advantageous geographic location. He confirmed recent meetings with top U.S. oil company executives from Occidental, Chevron, Exxon-Mobil, Conoco-Philips and Marathon, describing them as positive and routine. -------------- The National Energy Council(NEC): "Not a bottleneck" -------------- ¶5. (C) Ghanem attempted to clarify the role of the recently-formed "National Energy Council" (NEC). (Note: This new government entity is composed of the Ministers of Industry, Planning, Economy, Finance, and Labor, as well as Ghanem and GPC Secretary or "Prime Minister" Al-Mahmoudi. Its formation has SIPDIS raised concerns among largely professional, technocratic operation would be become more politicized, or at the very least add an unnecessary bureaucratic layer over the GOL energy sector. End Note). According to Ghanem, the new body will "not be as people think; it will be strictly consultative, not a bottleneck." Ghanem stressed this point several times, emphasizing that the NEC will produce efficiencies, rather than more bureaucracy. The NEC will be tasked by the full Cabinet to make energy sector decisions from time to time, and its select membership will help ensure that government laws and operations do not negatively impact the energy sector. -------------- Trade Shows and Conferences -------------- ¶6. (C) Noting active USG and US company interest in, and support for, the upcoming Project Libya conference (December 4-7) Charge requested that Ghanem meet with visiting representatives of U.S. companies during that period. Ghanem was non-committal, but agreed to see what was possible if he was not traveling abroad. Charge noted the great proliferation of conferences in Libya, particularly those concerning the energy sector, and many of which made claims to sponsorship by GOL entities. In this vein, Charge inquired whether the NOC was supporting the November 21-22 "Libya Oil and Gas Show" (as indicated in the exhibition's promotional materials). In response, Ghanem conveyed measured exasperation at the number of exhibitions and conferences being staged across Libya, and his view that they detracted from "real work." He opined that many of them were primarily money-making operations staged by individuals with varying levels of government connections. Regarding the 21-22 November event, Ghanem recalled agreeing to authorize a NOC statement of support, but stated that the NOC did not plan to play an active role in the exhibition. BERRY GOLDRICH