Libya kept in the dark
The reinstatement of National Oil Corporation chairman Shokri Ghanem is a positive sign, but Libya’s increasing oil nationalism is alienating foreign firms and governments, says Trends magazine.
March 3, 2010 10:26 by Clare Dunkley
“Otherwise it is the NOC which oversees the activities of the companies which suggests to them proposals.” At the same time, he reassured IOCs about an order earlier in the year seemingly requiring their Libyan operations to be headed by a national. Part of the nationalization trend has been the aim of harnessing development of the country’s oil industry to help create jobs, aspects of which Ghanem – who is no free-wheeling Anglo-Saxon capitalist – was supportive, such as the requirement that offshore engineering on oil projects was replaced by the work being done locally.
“We are trying to Libyanize everything,” he told ‘Arabian Oil & Gas’ in an interview shortly before his departure. “We are asking all engineering companies to do their work in Libya and open offices. Building capacity is very important for us.”
However, he was also realistic enough to realize that the domestic capacity and expertise to take charge of the industry had yet to be built and in Doha he made clear that the rules on local CEOs excluded the oil sector.
“Foreign [oil] companies working in Libya, especially [those] in exploration, they will not be compelled to have a Libyan CEO,” he said. “It is of course a hope, an aim, that we see some Libyan CEOs of companies in Libya but of course we appreciate in the meantime the special nature of the oil companies.”
Coincidentally or not, Ghanem’s reinstatement was followed by an end to the year-long saga over control of Canada’s Verenex Energy – another issue where the GPC’s bypassing of NOC in the decision-making process frustrated its chairman.
Through a combination of the quality of the acreage on offer and a lack of available funding for exploration from either NOC or, in the case of IOCs, from the commercial finance market, the results of exploration in concessions awarded during the four licensing rounds held since 2005 has been disappointing.
The only exception to this was block 47 in the Ghadhames Basin, operated by Verenex, a small independent of which the series of discoveries there became its main asset. Lacking the funds to commercialize the discoveries, the Canadian firm in February accepted a $500 million takeover bid from China National Petroleum Corporation, subject to approval or pre-emption by NOC.
For months, neither was forthcoming. Instead, unofficial comments indicated Libya’s intention to exercise the latter rights, Verenex issued a public statement in late June accusing NOC of unreasonably obstructing the deal, and Tripoli countered with a spurious claim that the company had been improperly qualified for the licensing round in the first place.