Shell’s Pulling Out of Libya

[tabatha]

By Ibrahim A. El Mayet

In a statement on Monday Royal Dutch Shell announced it will cease exploration activities and abandon drilled wells in Libya citing harsh contracts and current insecurity as major factors in the decision. Like many International oil companies (IOCs) Shell has had disappointing exploration results in their Libyan concessions in recent years which led the company to consider further exploration works to be economically unsound. The move does not represent a departure from Libya; the company will maintain its representative office in Tripoli and continue to engage with the Libyan authorities and the National Oil Corporation (NOC) for future opportunities.

It seems that the new Libyan authorities have been slow to meet the hopes of IOCs for more preferable terms and the current interim government would rather maintain the contracts that are based on EPSA IV agreements terms to stay the same. These issues will have to be addressed by the new government which will be formed after the elections scheduled for 19th June.

While Libya is keen to protect it sovereign assets, Libya’s oil industry depends on the engagement of IOCs. Following Shells decision, Germany’s Wintershall the second largest IOC in Libya (accounting for nearly 6% of Libyan output) has issued a warning that the current terms could impact on decisions regarding future investment in Libya. Libya faces many challenges in maintaining current levels of production at mature fields and finding and developing new oil fields as well. Yet most of the large Libyan territories remain unexplored as a result of past sanctions and disagreements with foreign oil companies.

While Libya holds the largest oil reserves in Africa and the eight largest oil producer in the world its oil is even more attractive due to its low cost of oil recovery, high oil quality and proximity to European markets, Shell’s pulling out represents a message from key players in oil industry to the Libyan government and that is ‘we do not see eye to eye’.

Source: Tripoli Post

http://www.tripolipost.com/articledetail.asp?c=2&i=8476

Yep, it was "all about oil". Yet oil companies have not found any changes since Gaddafi was in power.

[mazzarro]

1. Oh ooh! It seems like the Libyans are ungratefull

They should realize that they were "liberated" by the grace of the IOC's intervening on their behalf to the various oil-hungry governments of the world. And to show ingratitude is an unwelcome is disrespectful and can result in severe repercussions!

[tabatha]

5. The NTC stated from early on

that they would not be changing any contracts that were established under Gaddafi. The elected govt would do that. However, they would be looking into corruption. There was some under the table dealing with the UK and the US under Gaddafi.

Far too much supposition and hype rules the interpretation by various people - and which strictly reflects their biases. It is not only a right-wing phenomenon.

[HiPointDem]

2. shell isn't pulling out of libya, as it clearly states in the text.

"The move does not represent a departure from Libya; the company will maintain its representative office in Tripoli and continue to engage with the Libyan authorities and the National Oil Corporation (NOC) for future opportunities."

"Shell’s pulling out represents a message from key players in oil industry to the Libyan government and that is ‘we do not see eye to eye’."

"While Libya is keen to protect it sovereign assets, Libya’s oil industry depends on the engagement of IOCs. Following Shells decision, Germany’s Wintershall the second largest IOC in Libya (accounting for nearly 6% of Libyan output) has issued a warning that the current terms could impact on decisions regarding future investment in Libya."


shell is giving whoever's in charge in libya a little discipline to let them know who's really in charge.

do you even read the stuff you post? the message is 180 from your title.

[Auggie]

4. The article says "pulling out" -- read your own response, 2nd paragraph.

Take a sec before you rush to scold.

[HiPointDem]

6. yes, the article says "pulling out". And the OP editorializes on that by saying, "see, it wasn't

about the oil".

But if you read the content, it's pretty clear shell is just shutting down economic activity for the moment as a bargaining tool for better terms -- sticking it to whoever governs libya by shutting off their oil-generated revenues.

It seems that the new Libyan authorities have been slow to meet the hopes of IOCs for more preferable terms and the current interim government would rather maintain the contracts that are based on EPSA IV agreements terms to stay the same.

[tabatha]

8. Fail.

The Libyans will be up to pre-war production levels next month - something that was expected to take two years.

Also read my comment about how the NTC stated more than once (google it) that they would NOT change oil contracts signed under Gaddafi - but would leave it up to the new government. This has been known for over a year. Shell could have left last year if they wanted to.

Economic development in Libya will be by the Libyans themselves and the revenue will go to Libyans not Gaddafi. They will choose which outside contractors they want to hire and which not. However, they are very concerned that Libyan money should stay with Libyans, because after 42 years of the bulk of the revenue going to the Gaddafis, they do not want a repeat. Gaddafi was the richest man in the world - $200 billion.

But do not let prejudices get in the way of facts.

[HiPointDem]

10. The article is about the oil corps playing hardball with Libya to get more profits, not about

shell pulling out of libya.

It supports the contention that the war *was* about the oil, not the reverse.

[Luminous Animal]

12. It appears that you are right (link to a much more in depth article)...

Shell is pulling out while BP is committing and it looks like got more favorable treatment. So, Shell stops FOR NOW, keeps its reps in Libya and seeks similar flexibility with the NOC that BP received.

http://www.libyaherald.com/bye-bye-shell-hello-bp/

It was not to be. In 2008, Shell began to shoot 3D seismic in Area 89, the following year drilling six wells with an investment of $95 million, while paying NOC $103 million for permit rights. In December 2010 it was reported that the first gas had been found. At the time, an official with Shell Exploration and Production Libya, Nureffin Wafati said further exploration wells were necessary to establish if the reserves were commercial. Shortly afterwards, Brinded visited NOC in Tripoli for talks, the details of which were never made public.

Later Shell said that the results were disappointing and did not justify further investment. There was speculation that the find was of insufficient magnitude to generate a profitable supply contract to Brega, let alone to underwrite the construction of a state-of-the-art LNG plant.

...

Given that Area 89 was not going to produce the feedstock for the existing Brega facility, rejuvenated or not, the figures for Shell no longer added up. What could have been a multi-billion coup was turning into wormwood. If, as Shell has indicated, the NOC has been less flexible with the Anglo-Dutch major in renegotiating than it appears to have been with BP, then Shell’s departure may be seen as inevitable. BP also has its Ghadames blocks where there is heightened expectation of fresh highly commercial reserves.

However Shell has not apparently abandoned Libya for ever. Dow Jones yesterday reported an internal Shell email as telling employees: “This is not a country exit, and a Shell Representative Office will remain in Libya.”

[pampango]

14. Great article. Seems BP is expected to comply with the terms it signed with Ghaddafi in 2009.

"Shell has reportedly been influenced in its pull-out decision by a combination of poor results from its five exploration blocks, rising security concerns for its personnel and operations and suggestions that the government is driving too hard a deal on Qaddafi-era contracts, which it said originally would be honoured."

Libya's National Oil Company chairman, Dr Nuri Buruwin: ”We thank BP for its commitment to Libya by lifting the force majeure. The NOC will work with BP to deliver the objectives of the EPSA and extends all help and support to BP in order to implement the agreed work program as per existing EPSA terms.”

"Shell’s experience in Libya has been mixed. With the 2004 lifting of international sanctions against the Qaddafi regime, it was the first international oil company to sign an exploration and production deal that focused on gas production and processing."

Sounds like BP is going to comply with "existing EPSA terms" which were the terms of the "original Exploration and Production Sharing Agreement (EPSA) contract with NOC, signed in December 2007" with the Ghaddafi government.

The article doesn't say why Libya was being tougher with Shell and wouldn't just let it function under the terms of the EPSA signed with Ghaddafi. It did point out that Shell was the first IOC to sign an oil development deal with Ghaddafi when international sanctions were lifted in 2004.

It is good to know that the Libyan government is forcing IOC's to, at a minimum comply, with the requirements of the contracts they signed with Ghaddafi and are trying to negotiate even tougher deals in some cases.

[malthaussen]

3. Sounds like a simple threat to me:

"We're holding our jobs hostage until you people in government give us what we want."

-- Mal

[tabatha]

7. It is all in the eye of the beholder.

The Libyans, on their own, will be up to pre-war production levels next month - something that was expected to take two years. There are smart people everywhere, including Libya.

What one person perceives as a threat, the truth may be that it is a waste of money for Shell to continue right now - especially with the economic problems in Europe.

[pampango]

9. Indeed a threat. The good news is that the Libyan government is playing hardball with the IOC's

which is what motivated Shell to make this threat. There were many who thought the Libyan government would simply do whatever the IOC's wanted. It is good to see that, so far, that is not what is happening.

[Iterate]

11. Plus, Gadaffi-era corruption investigation continues

Last edited Fri Jun 1, 2012, 04:46 PM - Edit history (1)

Interpol Issued Arrest Warrant for Ex-Libyan Minister Before Death
MIDDLE EAST NEWS May 23, 2012, 1:44 p.m. ET

LONDON—Interpol issued an international request to arrest Libya's ex-oil minister Shokri Ghanem in connection with an anti-corruption investigation in his home country, days before his body was found in the River Danube in Vienna, according to a document issued by Interpol.
...

Mr. Ghanem is "a fugitive person wanted for trial," according to the document seen by The Wall Street Journal. It asks to "arrest him in order to hand him over" to Libya, with Egypt, the United Arab Emirates, Qatar and Austria mentioned as possible countries where he could be found.

A spokesman for Libya's Interior Ministry confirmed Mr. Ghanem "was on the list" of individuals whom Libya had sought to arrest through Interpol. "

The document, which said the Libyan prosecutor's office had initially made the request, accused Mr. Ghanem of "fraud of public money...causing intentional damage to public money… interfering in incomes ... making illegal gains and abuse of power."

http://online.wsj.com/article/SB10001424052702304840904577422372487434582.html?mod=googlenews_wsj

This explains the the relationship of the investigation to certain Chinese oil companies. BTW, Shell and PetroChina have several joint ventures together, but I don't know if it's anything out of the ordinary:

Libya Investigating Unipec, PetroChina Oil Deals Under Gadhafi - Document

Dow Jones Newswires Published May 22, 2012

LONDON – 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.

http://www.foxbusiness.com/news/2012/05/22/libya-investigating-unipec-petrochina-oil-deals-under-gadhafi-document/

[EFerrari]

13. BP to resume operations in Libya

http://www.reuters.com/article/2012/05/29/us-bp-libya-idUSBRE84S0ZB20120529