US embassy cable - 04TRIPOLI28

C O N F I D E N T I A L TRIPOLI 000028 
 
 
LONDON FOR GOLDRICH 
PARIS FOR ZEYA 
 
E.O. 12958: DECL:  12/12/2014 
TAGS: EPET, ECON, PREL, LY 
SUBJECT: (C) U.S. OIL COMPANIES PERSEVERE IN LIBYA 
 
REF: TRIPOLI 0026 
 
 
1. (C)  Oasis/Oxy Update:  The oil majors were in Tripoli the 
week of December 6 for yet another Libyan economic conference 
(reftel).  The former Oasis partners (Marathon, Amerada Hess, 
ConocoPhillips) are continuing their negotiations with the NOC 
for re-entry into the Libyan oil market, as is Occidental. 
ConocoPhillips told us that they have initialed an agreement 
with the Libyans for re-entry to the Libyan oil market based on 
the arrangement they had before pulling out in 1986.  Conoco 
characterized the agreement as "not good," but said the company 
views it as "dues-paying" in order to return to the Libyan 
market.  Occidental, on the other hand, seems to be hanging 
tougher with the Libyans.  In a November meeting in Libya, 
Occidental CEO Ray Irani told Libyan PM Shukri Ghanem that the 
agreement proposed by the Libyans would cost Occidental USD 200 
million, something he could not justify to the shareholders. 
Occidental has offered an alternative to the Libyans; although 
it has received no response so far, Oxy seems willing to wait it 
out for a while.  Marathon, like ConocoPhillips, appears more 
willing to pay a price for re-entry into the Libyan oil market. 
 
2. (C)  EPSA IV Update:  Meanwhile, American and non-American 
oil companies are awaiting the results of the first EPSA IV bid 
round.  Winning bids are supposed to be announced on January 19, 
but there are rumors that the announcement could be delayed 
(NFI).  Tariq Hassan-Beck, director of planning for the National 
Oil Company (NOC), has said publicly that the NOC is already 
working on the round two bidding package, which could take place 
in the first half of 2005.  "We're learning from round one," he 
commented; but provided no details.  Shortly thereafter, Poe 
Legette, partner, described some of the legal problems 
encountered in the EPSA IV process, including the fact that 
contracts must be approved by the General People's Committee and 
overall uncertainty about which laws apply under which 
circumstances. 
 
3. (C) Azzam Messalatti, chairman of the NOC's upstream 
negotiation committee, mentioned that the NOC is also working on 
Development and Production Sharing Agreements (DPSAs) which 
would be similar to the EPSAs, but focused on development rather 
than exploration.  This is the first that we and some of the 
American companies have heard of this.  Messalatti also briefly 
mentioned a Libyan "Gas Master Plan," which he said has been 
approved in response to an increase in demand for natural gas. 
The plan includes upgrading facilities and developing fields. 
 
4. (C) COMMENT:  The U.S. oil companies are clearly looking at 
Libya as a place where they expect to be doing business in the 
future.  ConocoPhillips already has an office here; Amerada 
Hess, Chevron-Texaco, and Exxon-Mobil are all in the process of 
signing leases for office space in downtown Tripoli and are 
bringing in country managers for Libya.  Some of the U.S. oil 
companies commented privately (as they have in the past) that 
it's not clear that the way the EPSA IV round was run will 
result in the best foreign partners for Libya.  According to 
them, the process doesn't really allow for consideration of the 
bidder's experience and quality of technology.  The only time 
such factors could have been considered was in the qualifying 
round, but given that 68 out of 120 companies qualified, some 
companies wonder how much weight was given to those aspects of 
the bidding process.  Of course, the U.S. companies have a 
personal interest in cutting down the amount of competition, and 
their edge is clearly in the experience and technology they can 
bring to development of Libyan oil fields, not necessarily in 
being the ones offering the sweetest financial deal to the GOL. 
END COMMENT. 
 
 
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