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Cablegate: European Oil Companies Extend Contracts in Libya

TRIPOLI 00000597 R UN 23-JUL-08 EUROPEAN OIL COMPANIES EXTEND CONTRACTS IN LIBYA [7824779]From:
CBPC, EACTAPP [EACTAPP@state.sgov.gov]
Sent: Wednesday, July 23, 2008 7:55 PM
To: EACTTripoli
Subject: TRIPOLI 00000597 R UN 23-JUL-08 EUROPEAN OIL COMPANIES EXTEND CONTRACTS
IN LIBYA [7824779]

UNCLAS

VZCZCXRO4416
RR RUEHTRO
DE RUEHTRO #0597 2051806
ZNR UUUUU ZZH
R 231806Z JUL 08
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC 3724
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHRB/AMEMBASSY RABAT 0678
RUEHMD/AMEMBASSY MADRID 0028
RUEHEG/AMEMBASSY CAIRO 1172
RUEHAS/AMEMBASSY ALGIERS 0732
RUEHVT/AMEMBASSY VALLETTA 0329
RUEHFR/AMEMBASSY PARIS 0558
RUEHNY/AMEMBASSY OSLO 0011
RUEHTRO/AMEMBASSY TRIPOLI 4234

UNCLAS TRIPOLI 000597

SENSITIVE

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

E.O. 12958: N/A
TAGS: ECON EINV EPET NO SP FR AU LY
SUBJECT: EUROPEAN OIL COMPANIES EXTEND CONTRACTS IN LIBYA

1. (SBU) Summary: Libya's National Oil Corporation (NOC) has signed extensions for a pair of exploration and production sharing agreements (EPSAs) with Spain's Repsol, France's Total, Austria's OMV, and Norway's Saga Petroleum, continuing its policy of redefining old contracts under the new EPSA IV framework. The joint investment commitment in the new deal should help boost Libyan production significantly in the years to come. End Summary. 2. (SBU) In a widely-anticipated move, a consortium of European oil companies has extended its contracts in Libya. A new EPSA agreement signed on July 17 with a four-company consortium operated by Spain's Repsol covers two blocks, NC115 and NC186, in the Marzuq Basin, and extends the duration of the contracts to 2032. This represents an additional 15 years for NC-115, and from five to nine years (depending on the specific fields) in block NC-186. The deal ensures the exploitation of the vast resources discovered in both blocks, whose remaining proven oil reserves at the end of 2007 totaled 765 million barrels. 3. (SBU) Within the new framework, the production share for the European consortium will be reduced from 25% to 13% for NC-115 and from 40% to 12% for NC-186. Under the former agreement, the production share was 75% for the NOC, 10% for Repsol, 7.5% for OMV, and 7.5% for Total in Block NC-115; and 60% for the NOC, 12.8% for Repsol, 9.6% for OMV, 9.6% for Total, and 8% for Saga. The new agreement represents 87% for NOC, 5.2% for Repsol, 3.9% for OMV, and 3.9% for Total for block NC-115. In block NC-186 the new percentages run 88% for the NOC, 3.84% for Repsol, 2.88% for OMV, 2.88% for Total and 2.4% for Saga. The new contract also includes a $1 billion signature bonus payable by the consortium over three years, and a gross investment requirement in excess of $4 billion, of which 50% will be covered by the NOC, in an effort to reach a steady-state production level of 380,000 barrels of oil per day. 4. (SBU) Comment: Repsol, OMV, Total and Saga Petroleum have followed other major actors in Libya in acceding to pressure by the NOC to convert to the new EPSA-IV framework, which features significantly reduced production shares for international oil companies (IOC's). The revised deals have allowed IOC's to guarantee access to significant deposits of high-quality oil while also securing new field development opportunities jointly funded by the NOC. The expected increase in production under this deal should make a significant contribution to the NOC4s aspiration of doubling Libya's oil output to more than 3 million barrels per day in the coming years. End comment. GODFREY

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