Petro-Canada could benefit from Libya’s course correction

Gary Park

Petroleum News Calgary correspondent

With Libyan leader Moammar Gadhafi close to shedding his global bad-boy status, oil giants are salivating at the prospect of once more gaining access to proved reserves of about 30 billion barrels.

If the North African country delivers on its pledge to give up weapons of mass destruction and the United States ends 17 years of economic sanctions, ConocoPhillips, Marathon Oil, Amerada Hess and Occidental Petroleum are all eager to return to oil fields they were forced to abandon.

A dearth of exploration has held Libyan production to about 1.5 million barrels per day, or 2 percent of world supplies, but that could progressively be doubled by 2020, helping both the United States and Europe reduce dependence on Saudi Arabia.

For now, most of the international ventures in Libya have been run by Total of France, ENI of Italy and OMV of Austria., while the National Oil Company of Libya reached a $100 million agreement in December with a group formed by Woodside Petroleum of Australia, Repsol of Spain and Hellenic Petroleum of Greece to develop several fields.

Also well positioned are almost 20 Canadian-based companies, with E&P, service and consulting interests in Libya, led by Petro-Canada.Through various acquisitions, Petro-Canada has engaged in exploration and production of nine concessions, most of them in the onshore Sirte basin.

Operations are conducted by a joint venture company, Veba Oil Operations, owned by Libya’s National Oil Co. (51 percent) and Petro-Canada’s subsidiary Veba Oil Libya (49 percent).

With interests in more than 20 producing fields, notably the giant Amal field, Petro-Canada ended 2002 with average production of 43,500 bpd from reserves of more than 100 million barrels.

In 2003, the En Naga field come on stream and Petro-Canada has been weighing other new opportunities in Libya — a process that will likely be accelerated if Libya maintains its current course and doesn’t impose unacceptable conditions on foreign companies.

The one encouraging sign already is that Libya refrained from nationalizing the assets that U.S. companies left behind in 1986.

Wood Mackenzie Consultants of the United Kingdom has described Libya as “highly underexplored” and ready to profit from advanced drilling techniques that could boost recovery rates from aging fields.