U.S. Oil Firms Reach Deal With Libya
By Jeffrey Ball
Wall Street Journal
December 30, 2005
Three U.S. oil companies said they will pay a total of $1.83 billion to Libya's national oil company to resume producing oil there, the latest sign of a warming of relations between the U.S. and the North African nation.
ConocoPhillips, Marathon Oil Corp. and Amerada Hess Corp. said they reached an agreement with Libya to resume operations there for the first time since 1986, when the U.S. imposed sanctions on the country and forced the oil companies to abandon their production.
The announcement marks the latest move into the country for U.S. oil companies, at a time when the world's best remaining energy reserves are located in countries that are politically turbulent or closed to Western firms. Over the course of this year, Exxon Mobil Corp., Chevron Corp. and Occidental Petroleum Corp., in addition to Amerada Hess, have won bids for exploration licenses in Libya's first oil and natural-gas licensing rounds since sanctions against the country were lifted last year.
Yesterday's announcement means Conoco, Marathon and Amerada Hess are free to resume production in an area that produces about 350,000 barrels of oil per day and is believed to hold big additional stores of oil and natural gas. Under the deal, Conoco and Marathon each will hold about a 16% interest in the project, Amerada will hold an 8% interest, and Libyan National Oil Corp. will hold the remaining 59%.
Marathon, based in Houston, said it expects its re-entry to Libya to add 40,000 to 45,000 barrels per day of production during 2006. It said it also expects the move to add more than 160 million barrels of oil equivalent to its proven reserves.
Amerada Hess, based in New York, said the re-entry will add 20,000 to 25,000 barrels per day of production, and more than 85 million barrels of oil equivalent to proven reserves.
Conoco, based in Houston, said the move will add about 45,000 barrels per day of production. It said it doesn't disclose reserve levels in individual countries.
No special permissions from the U.S. government were needed for yesterday's announced deal. Although the White House has lifted all sanctions on nonmilitary trade, Libya remains on the U.S. terrorism list. That means companies are either banned or restricted from selling military equipment and so-called dual-use items with potential military applications.
The production region to which the companies are returning encompasses nearly 13 million acres in Libya's Sirte Basin. Since the U.S. oil companies -- which operated in the area as a joint venture called the Oasis group -- were forced to abandon the region nearly two decades ago, their assets have been in escrow and the area has been operated by Waha Oil Co., a unit of Libyan National Oil Corp.
Under the agreement, the three companies' licenses will be extended for an additional 25 years. In addition to getting the majority of the oil, Libyan National Oil Corp. will get a payment from the three companies totaling $1.3 billion, and an additional payment of $530 million to cover costs that the Libyan company incurred since 1986 in keeping up the fields.
Of the $1.3 billion, Conoco and Marathon each will pay $520 million and Amerada Hess will pay $260 million. Of the $530 million payment, Conoco and Marathon each will pay $212 million and Amerada Hess will pay $106 million.
Libya has been moving toward improved relations with the West since the late 1990s. The rapprochement has been particularly rapid over the past two years. In summer 2003, Libya accepted blame for the 1988 bombing of Pan Am flight 103 and agreed to compensate relatives of the victims. That led the United Nations to lift its sanctions, but the U.S. demanded that Libya abandon its pursuit of weapons of mass destruction, a step Libya took in December 2003. Two months later, the White House announced it was giving U.S. companies that still held oil concessions in Libya permission to start negotiating their return to the country, subject to "further U.S. approval for implementation." Later in 2004, the U.S. formally lifted sanctions, clearing the way for a return by the U.S. companies.
Following a Libyan bid round this past January in which Occidental, Chevron and Amerada Hess, among others, won licenses, Libya announced a second round of exploration-license winners in October. Among them: Exxon and Italy's Eni SpA.
Yesterday, Conoco, Marathon and Amerada Hess all said in statements that they were pleased with the agreement and expressed hope that they would find additional stores of oil and gas in the region.
Libya, a member of the Organization of Petroleum Exporting Countries, has said it hopes to boost its oil-production capacity to three million barrels a day by the end of the decade. Years of sanctions and underinvestment have pushed production down well below the country's 1970 peak of 3.3 million barrels a day. Libya had 36 billion barrels of proved oil reserves -- the world's eighth largest -- and 45.5 trillion cubic feet of natural-gas reserves as of January 2005.
Wall Street Journal
December 30, 2005
Three U.S. oil companies said they will pay a total of $1.83 billion to Libya's national oil company to resume producing oil there, the latest sign of a warming of relations between the U.S. and the North African nation.
ConocoPhillips, Marathon Oil Corp. and Amerada Hess Corp. said they reached an agreement with Libya to resume operations there for the first time since 1986, when the U.S. imposed sanctions on the country and forced the oil companies to abandon their production.
The announcement marks the latest move into the country for U.S. oil companies, at a time when the world's best remaining energy reserves are located in countries that are politically turbulent or closed to Western firms. Over the course of this year, Exxon Mobil Corp., Chevron Corp. and Occidental Petroleum Corp., in addition to Amerada Hess, have won bids for exploration licenses in Libya's first oil and natural-gas licensing rounds since sanctions against the country were lifted last year.
Yesterday's announcement means Conoco, Marathon and Amerada Hess are free to resume production in an area that produces about 350,000 barrels of oil per day and is believed to hold big additional stores of oil and natural gas. Under the deal, Conoco and Marathon each will hold about a 16% interest in the project, Amerada will hold an 8% interest, and Libyan National Oil Corp. will hold the remaining 59%.
Marathon, based in Houston, said it expects its re-entry to Libya to add 40,000 to 45,000 barrels per day of production during 2006. It said it also expects the move to add more than 160 million barrels of oil equivalent to its proven reserves.
Amerada Hess, based in New York, said the re-entry will add 20,000 to 25,000 barrels per day of production, and more than 85 million barrels of oil equivalent to proven reserves.
Conoco, based in Houston, said the move will add about 45,000 barrels per day of production. It said it doesn't disclose reserve levels in individual countries.
No special permissions from the U.S. government were needed for yesterday's announced deal. Although the White House has lifted all sanctions on nonmilitary trade, Libya remains on the U.S. terrorism list. That means companies are either banned or restricted from selling military equipment and so-called dual-use items with potential military applications.
The production region to which the companies are returning encompasses nearly 13 million acres in Libya's Sirte Basin. Since the U.S. oil companies -- which operated in the area as a joint venture called the Oasis group -- were forced to abandon the region nearly two decades ago, their assets have been in escrow and the area has been operated by Waha Oil Co., a unit of Libyan National Oil Corp.
Under the agreement, the three companies' licenses will be extended for an additional 25 years. In addition to getting the majority of the oil, Libyan National Oil Corp. will get a payment from the three companies totaling $1.3 billion, and an additional payment of $530 million to cover costs that the Libyan company incurred since 1986 in keeping up the fields.
Of the $1.3 billion, Conoco and Marathon each will pay $520 million and Amerada Hess will pay $260 million. Of the $530 million payment, Conoco and Marathon each will pay $212 million and Amerada Hess will pay $106 million.
Libya has been moving toward improved relations with the West since the late 1990s. The rapprochement has been particularly rapid over the past two years. In summer 2003, Libya accepted blame for the 1988 bombing of Pan Am flight 103 and agreed to compensate relatives of the victims. That led the United Nations to lift its sanctions, but the U.S. demanded that Libya abandon its pursuit of weapons of mass destruction, a step Libya took in December 2003. Two months later, the White House announced it was giving U.S. companies that still held oil concessions in Libya permission to start negotiating their return to the country, subject to "further U.S. approval for implementation." Later in 2004, the U.S. formally lifted sanctions, clearing the way for a return by the U.S. companies.
Following a Libyan bid round this past January in which Occidental, Chevron and Amerada Hess, among others, won licenses, Libya announced a second round of exploration-license winners in October. Among them: Exxon and Italy's Eni SpA.
Yesterday, Conoco, Marathon and Amerada Hess all said in statements that they were pleased with the agreement and expressed hope that they would find additional stores of oil and gas in the region.
Libya, a member of the Organization of Petroleum Exporting Countries, has said it hopes to boost its oil-production capacity to three million barrels a day by the end of the decade. Years of sanctions and underinvestment have pushed production down well below the country's 1970 peak of 3.3 million barrels a day. Libya had 36 billion barrels of proved oil reserves -- the world's eighth largest -- and 45.5 trillion cubic feet of natural-gas reserves as of January 2005.
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