No new Libyan oil round for at least a year

Reuters reported that Libya has enough companies exploring for oil and will not hold any licensing rounds for at least a year as it waits for demand prospects to improve, the OPEC member's top oil official said on Thursday.

"Our effort now is to develop what we have, rather than trying to find more new oil," Shokri Ghanem told Reuters after a meeting of the Gas Exporting Countries Forum in Doha.

Asked when a new round may be held, he said: "Not before one year. When you see the demand in the world is enough to absorb the available or excess capacity, then we will move".

After years of diplomatic isolation, Libya has opened up Africa's biggest proven oil reserves to dozens of foreign energy firms in a series of hotly-contested exploration rounds.

Those companies accepted tight revenue shares and an unpredictable, opaque operating environment for access to some of the world's most promising acreage.

Lower oil prices have made for a rockier ride this year for the foreign companies investing billions of dollars in Libya. Major firms operating there include BP, ENI and ExxonMobil.
Libyan leader Muammar Gaddafi briefly raised the idea of oil sector nationalisation, and a dispute with Canadian oil firm Verenex ended with shareholders forced to sell the company to Libya.

The western-friendly Ghanem stepped down for a few weeks and his authority was challenged by a new Supreme Council for Energy Affairs (SCEA).

In another measure that rattled international energy firms, a government directive appeared stating that foreign joint ventures must have a Libyan national as chief executive.
Ghanem, chairman of Libya's state National Oil Corporation (NOC) since 2006, moved to reassure foreign oil firms on Thursday.

"Foreign companies working in Libya, especially in exploration, they will not be compelled to have a Libyan CEO. The oil industry is in a special situation. This is more about other sectors."
Neither existing nor new joint ventures in the oil industry would be affected, he said.

"It is of course a hope, an aim, that we see some Libyans being the CEOs of companies in Libya but of course we appreciate in the meantime the special nature of the oil companies."

OIL POLICY

Ghanem said NOC was still in charge of oil policy, playing down the role of the SCEA which is dominated by conservatives close to Prime Minister Al-Baghdadi Ali al-Mahmoudi.
"It is the NOC that is now responsible for the policy and the practices of the oil industry in Libya," he said.

Asked if decisions were approved by the SCEA, Ghanem said: "No, by the cabinet. Otherwise it is the NOC which oversees the activities of the companies which suggest to them proposals."
The creation of the SCEA led to speculation that Libya's powerful old guard was trying to undermine the authority of Ghanem, who foreign investors see as a sympathetic partner.
Investors were also worried that if the council took an active role in decision making it could further slow the pace of energy project approvals.

Sluggish bureaucracy aside, the drop in oil prices has led Libya and other OPEC members to look again at some investments to boost oil production.

Ghanem said on Saturday that Libya would not meet a 2012 oil output capacity target of 3 million barrels per day.

When oil prices peaked, national oil companies decided it was worth producing more and many new investment projects were studied, Ghanem said on Thursday.

"But then there were cost increases and oil prices went down," he said. "There is also a glut in capacity ... so it became non-economical to pursue so many expansions."

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

Verenex investors await Libyan counter bid

Investors in Canada's Verenex Energy Inc. said on Wednesday they saw growing risks of delays in the $C499 million ($425 million) sale of the company to China or Libya.

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) but Verenex in its earnings release on Tuesday said Libya had yet to make a formal offer.

Shares of Verenex were trading little changed at C$9.16 on Wednesday, indicating investors still expect a sale to happen. But some are uneasy over the lack of a formal bid from Libya, or word on Libya's consent to China's offer.

"The best thing is either the Libyan government says yes to the Chinese, or the Libyan government agrees to buy it on the same terms," a Verenex shareholder who declined to be identified said on Wednesday.

"But we have to be prepared for a situation where the downside occurs and Verenex goes back to a much lower price if it doesn't happen.

Source: Reuters