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Cablegate: Chevron May Quit Libya

TRIPOLI 00000540 P CO 08-JUL-08 CHEVRON MAY QUIT LIBYA [7759727]From: CBPC,
EACTAPP [EACTAPP@state.sgov.gov]
Sent: Tuesday, July 08, 2008 9:22 PM
To: EACTTripoli
Subject: TRIPOLI 00000540 P CO 08-JUL-08 CHEVRON MAY QUIT LIBYA [7759727]

CONFIDENTIAL

VZCZCXRO1934
PP RUEHDE
DE RUEHTRO #0540 1901452
ZNY CCCCC ZZH
P 081452Z JUL 08
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC PRIORITY 3652
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHHH/OPEC COLLECTIVE
RUEHEG/AMEMBASSY CAIRO PRIORITY 1141
RUEHTU/AMEMBASSY TUNIS PRIORITY 0541
RUEHAS/AMEMBASSY ALGIERS PRIORITY 0707
RUEHRB/AMEMBASSY RABAT PRIORITY 0653
RUEHLO/AMEMBASSY LONDON PRIORITY 0858
RUEHFR/AMEMBASSY PARIS PRIORITY 0536
RUEHTRO/AMEMBASSY TRIPOLI 4161

C O N F I D E N T I A L TRIPOLI 000540

DEPT FOR NEA/MAG; COMMERCE FOR NATE MASON
ENERGY FOR GINA ERICKSON

E.O. 12958: DECL: 7/7/2018
TAGS: ECON EINV EPET ENRG LY
SUBJECT: CHEVRON MAY QUIT LIBYA

REF: TRIPOLI 532

CLASSIFIED BY: John T. Godfrey, Acting CDA, U.S. Embassy Tripoli, U.S. Department of State. REASON: 1.4 (e) 1. (C) Following up on rumors that Chevron had resigned itself to withdrawing from Libya in March 2010 after completion of its current exploration program, Econoff met with a local representative of the company on July 2 to discuss the company's future here. Chevron is currently conducting exploration of its lone Libyan concession - a parcel in the remote Marzuq Basin, located in the far southwest of the country - which it won in the March 2005 exploration and production sharing (EPSA) round. Chevron is one of six U.S. exploration and production (E&P) oil and gas companies active in Libya. 2. (C) Under the terms of its EPSA contract, Chevron is required to drill at least one well in its concession, which is considered to be a high-risk greenfield area (no exploration had previously been done there). Its program of seismic exploration and analysis has been completed; a subcontractor will begin drilling the first of two test wells in August. The wells will be drilled to further explore two sub-surface structures of interest, the only promising areas found following the collection and analysis of thousands of square kilometers worth of seismic data. Disappointing seismic results have generated a great deal of pessimism about the likelihood of a significant find. Given the parcel's remote of location, a very large discovery would be needed to make a field worth the cost of development and linkage to an existing pipeline network for export. Although Emboff's source demurred on the chances of success, other well-informed contacts in the oil and gas sector have characterized the prospects for the block as dim, estimating a 2-3% chance that sufficient reserves would be found upon drilling to make production commercially viable. 3. (C) Comment: While Chevron continues to assess new EPSA opportunities in Libya, the company has reportedly adopted a fairly conservative approach to bidding that would likely disadvantage the company's efforts to secure new acreage in future EPSA bidding rounds. Oil and gas contacts have noted Chevron's reluctance to adopt the prevailing "auction mentality" and accede to draconian EPSA terms, particularly low production shares, that the NOC is currently stipulating. Chevron's Houston headquarters is still hoping to obtain a "development resource opportunity" for acreage currently under production, likely under the rubric of a Development and Exploration Production Sharing Agreement (DePSA); however, recent remarks by NOC Chairman Shukri Ghanem (reftel) suggest that a DePSA round isn't likely to occur anytime soon. Barring a major find in Marzuq, which seems unlikely, or a significant shift in the company's bidding philosophy, it appears that Chevron's window of opportunity in Libya may well be closing. End comment. GODFREY

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