Libya Investigating Unipec, PetroChina Oil Deals Under Gaddafi

Libya's prosecutor office is probing possible irregularities in crude sales to oil giants China International United Petroleum & Chemical Co. (0386.HK), or Unipec, and PetroChina Co. Ltd. (0857.HK) as part of a broader probe into Gadhafi-era oil deals, a file from Libya's Interpol bureau shows.

A file issued last month, attached to a request of arrest against the late ex-oil chief Shokri Ghanem by Libya's Interpol bureau, alleges he agreed to sell oil without contracts to Sinopec and Petrochina.

The probe could cloud the return of energy-thirsty China to Libya after being cast as a supporter of the former regime.

Ghanem, the ex-head of the National Oil Co., "also delivered quantities of crude oil to several companies such as Unipec and PetroChina before signing an agreement with them," the file seen by Dow Jones said.

Sinopec and PetroChina spokespeople declined to comment.

Though Ghanem has since died in Vienna's Danube river in mysterious circumstances, the probe into his dealings continues, said Abdulhamid Eljadi, an anticorruption activist who has been assisting the investigation.

The rebels who fought former Libyan leader Moammar Gadhafi last year had previously said Chinese companies would be at a disadvantage for opposing the foreign intervention which led to them gaining power. However, Unipec, the trading unit of China's largest refiner Sinopec, has now returned to Libya as one of the country's largest oil buyers.

Sales to the two Chinese companies had previously been singled out for scrutiny by Libyan government officials.

The Libyan Interpol document said the issues surrounding sales to PetroChina and Unipec had been first raised by Najwa el-Beshti, who was head of contracts at NOC's marketing department under Ghanem.

Beshti told Dow Jones Newswires the sales had taken place between June 2008 and 2010.

She said contracts had typically been signed six months to a year after deliveries had started, potentially enabling the companies to pay with a delay.

Libyan oil officials have previously said companies which gained irregular deals under Gadhafi could be disadvantaged or lose deals under the new regime. Mustafa El-Huni, the official responsible for oil at the interim National Transitional Council, said last year it would be up to Libyan courts, not the NOC or the interim government, to establish if a contract is valid. "If [corruption] is proven, the law will judge," El-Huni said at the time.

Source: Dow Jones Newswires

www.soclibya.com 

Libya helps give Italy's Eni a Q1 profit boost

Italy's largest energy company Eni SpA said Friday that its first-quarter profits rose 42 percent on increased production in Libya and higher prices.

The Rome-based company said net profit for the first three months of 2012 was (EURO)3.62 billion ($4.78 billion), up from (EURO)2.55 billion in the same period last year, even though oil and natural gas production was down a modest 0.6 percent at 1.674 million barrels a day.

Eni shares nevertheless were trading up 0.1 percent to (EURO)16.58 on the Milan Stock Exchange.

Eni's Libyan production was cut off during the first quarter of last year due to the armed conflict in the country that endangered oil workers and blocked exports. Production is expected to reach levels achieved before the conflict of 280,000 barrels of oil equivalent a day by the second half of the year.

"Eni delivered excellent results thanks to the ongoing recovery of production in Libya and higher oil prices, despite the difficult market environment," Eni CEO Paolo Scaroni said in a statement.

Eni, however, said European refining operations were unprofitable. Eni said that was due to high raw oil prices, overcapacity in European refineries and sluggish fuel demand on higher consumer prices.

The company forecasts 2012 to be "challenging" due to the ongoing crisis and volatile market conditions.

Scaroni highlighted Eni's deal with the Russian oil giant Rosneft earlier this week to explore the Arctic, saying it "underpins our exploration opportunities for many years to come, further boosting our prospects for long-term growth".

Eni is active in Russia, where it has started production at the giant Samburgskoye field in Siberia. Production there is expected to reach 43,000 barrels of oil equivalent a day.

Eni also reported successful exploration in Mozambique, and signed a contract with China National Offshore Oil Corporation to explore an offshore basin in China.

By Colleen Barry

AP Business Writer

Libya's Ghanem not to attend OPEC meeting

According to the latest reports coming in and especially the one coming in from Reuters in which confirms what I have written before about the resignation of Mr. Shokri Ghanem.

Reuters stated that he will not be attending the upcoming OPEC meeting in Vienna and the reason is that he submitted his resignation and still waiting for a reply from the Libya authorities.

The main reason for him to resign according to Reuters is the dispute between Libyan and Verenex (Canadian Company) in which Libya was trying to buy the company and at the same time China was too trying to buy it and it led to Libya refusing to approve the deal for China.

The question now is who is going to replace him?

Sources: Reuters and Sahra Oil Consultancy

Libya hopes Verenex buy will not take long

Libya's plan to buy Verenex Energy Inc should not take long and it is well-placed to finance the deal, the country's most senior energy official said on Thursday.

Libya has said it will exercise its right to pre-empt a friendly C$10-a-share bid for Verenex from China National Petroleum Corp (CNPC) . It has yet to make a formal offer.

"Sometimes it's very difficult to give an exact time-frame, but I hope it will not take long," Shokri Ghanem, the chairman of Libya's National Oil Corporation, told Reuters television.

"Libya has quite a good fund," he said. "Most of the funds are invested in cash and cash is the king now, so I don't think we'll have a big problem regarding finance for this deal."

Verenex holds promising oil assets in Libya, home to Africa's largest oil reserves which has attracted a wave of interest from oil companies after the end of international sanctions.

With the assumption of debt, the C$10 a share offer from CNPC is worth C$499 million, the companies said when it was announced on February 26. The stock was unchanged at C$8.95 as of 1827 GMT.

Ghanem has previously stated that Libya would offer the same price as the C$10-a-share agreed by CNPC. He did not specify a purchase price in his comments on Thursday.

He said Libya had chosen to buy Verenex for commercial reasons.

Source: Reuters

Libya Will Match China National’s Offer for Verenex

Libya will match China National Petroleum Corp.’s C$499 million ($443 million) offer for Verenex Energy Inc., as the North African nation seeks to retain a larger share of its oil wealth.

“The government is now arranging the funds to buy Verenex,” Shokri Ghanem, chairman of Libya’s state-run National Oil Corp., said in a telephone interview today from Tripoli.

Libya, the holder of the continent’s largest oil reserves, wants to increase its share of petroleum revenue as the budget is squeezed by oil’s slump from July’s record. National Oil is a partner of Verenex, a Canadian explorer, and a preemption clause gives Libya first right of refusal on buying the assets.

China National, the nation’s biggest oil company also known as CNPC, agreed in February to purchase Calgary-based Verenex for C$10 a share in cash.

“CNPC’s offer is final,” Ghanem said today. “It cannot increase it because it’s not like an auction; we will match it.”

Verenex, whose shares more than doubled after the company put itself up for sale in November following four straight years of losses, rose 5.6 percent to C$9 as of 10:13 a.m. in Toronto.

Ghanem said in a March 16 interview that Libya wanted to purchase Verenex for “commercial reasons,” and not to limit the access of China National to its national oil reserves. Verenex has assets in Libya that are worth “hundreds of millions” of dollars, he said at the time.

In a statement on March 18, Verenex reiterated that the proposed sale of the company to China National was subject to “certain consents” from Libya’s National Oil.

China National began exploring for oil in Libya in 2005. Verenex had agreed to pay the Chinese company a C$15 million breakup fee if the company scuttled the deal.

Source: bloomberg

Slow progress sows doubts on Libyan oil prospects

* Foreign firms re-assess prospects
* Initial results disappoint
* Libya focuses on renegotiating old contracts


Disappointment at the slow pace of oil finds in post-sanctions Libya is sowing doubt over output targets and leading some foreign oil firms to re-assess their prospects in the country.

Libya was off limits for most foreign oil firms for decades and they accepted some of the industry's tightest exploration and production sharing deals when they were at last able to access Africa's most promising oil acreage.
That puts them under heavy pressure to deliver.

It is still early days for engineers scouring the desert country and its Mediterranean sea bed for oil and gas.

Super-majors such as BP Plc and Exxon Mobil Corp, which nurture the biggest ambitions for Libya, are still at the stage of seismic testing.
BP ended a 30-year absence from Libya in 2007 when it signed its biggest exploration commitment through a bilateral deal. It will spend at least $900 million to search the onshore Ghadames area and offshore Sirte basin with 17 exploration wells.
Yet analysts said they would have expected a higher rate of oil and gas discoveries in Libya so far.

"Overall, initial exploration results have been disappointing compared to the level of expectations only a few years ago," said Craig McMahon of Wood Mackenzie.
Verenex of Canada is the only winner of post-sanctions licences under Libya's EPSA-IV tender mechanism to have made sizeable finds, prompting a battle for ownership of the company between Libya and China National Petroleum Corp.
More recent discoveries by Hess, Repsol and RWE are seen by industry experts as promising.

"But there's no doubt that things are moving more slowly than some of the companies hoped," said Ben Cahill, Petroleum Risk Manager at consultants PFC Energy. "Libya's production targets are in jeopardy and it won't be able to meet them without shifting its emphasis in the next two years."
DELAYS

Libya's government is still aiming for oil production of 3 million barrels a day by 2012, up from 2 million this year, and sees a doubling of gas production by 2012 or 2013 from the current rate of 3.5 billion cubic feet (99.1 million cubic metres) per day.

A rise in the number of foreign firms in Libya has tested the ability of its National Oil Corporation (NOC) to approve contracts and development plans and led to delays, Cahill said.

Many that won acreage in post-sanctions tenders have not yet finalised those deals and NOC has been preoccupied by the renegotiation of older contracts to bring them in line with Libya's new fiscal terms.

Occidental was among the most successful bidders in a 2005 exploration and production licensing round but has ended exploration drilling to focus on existing fields, according to industry experts.

"Right now Libya is what it is," Occidental Chief Executive Ray Irani told analysts in late April. "Things move slower than we expected and studies continue to take place, but I don't expect any meaningful increases there for at least another 12 months."

Occidental reported first-quarter net production from Libya of 8,000 barrels per day, down from 22,000 bpd a year earlier.
That was the same as in the fourth quarter, when company officials talked of a reduction of 12,000 barrels of oil equivalent per day in Libya from a year earlier due to new contract terms.

TIGHTER TERMS
Analysts say Libya could further tighten terms for foreign oil firms in the next two years as deals struck in competitive tenders since the end of sanctions come up for renegotiation.

Lower prices have slashed windfall energy income and given ammunition to establishment conservatives who think foreigners exploiting Libya's precious resources are having it too easy.
That could further discourage oil firms disappointed at the rate of new finds and dampen exploration activity.
"Companies exploring under EPSA-IV haven't made the big finds they were hoping for and are thinking of revising their strategy," said Jon Marks, editorial director of industry newsletter Africa Energy.

There is big potential for output increases in the short term as new technology boosts the performance of ageing wells, analysts say.

There are also many near-field areas containing patchworks of smaller reserves that are close to transport infrastructure and could be developed relatively quickly.
Now a global drop in equipment and service costs may spur some licence holders in Libya to move ahead with their work.

"However, whether NOC will be in a position to approve and critically fund these work plans remains to be seen," said McMahon of Wood Mackenzie.

Source: Reuters