Libya Taps Billions from Petro-Canada for Oil Access

By Mike Caggeso
Associate Editor

Petro-Canada (PCZ) yesterday (Monday) announced a renegotiation of its existing oil exploration and production agreements with Libya’s state-run National Oil Corp., or NOC.

Under the new agreements, Petro-Canada and NOC have agreed to jointly invest $7 billion to develop new exploration projects and refurbish existing oil infrastructure. The new agreements extend the Petro-Canada/NOC relationship over the next 30 years, significantly beyond the expiration date of the old agreements.

Petro-Canada’s current explorations in Libya produce 100,000 barrels of oil (gross) per day. Under the new agreements, that figure is expected to double over the next five to seven years, the company said in a statement released Monday.

But that oil comes at a steep price. Under the revised deal, Petro-Canada – the country’s third largest oil company – will pay 50% of the capital development costs, while only receiving a 12% entitlement share of production. NOC, by comparison, will control 88% of the production.

Libya’s NOC Chairman Shokri Mohamed Ghanem told the U.K.’s Guardian newspaper that the new deal “will result in a reduction of the shares” of Petro-Canada from the pre-existing agreements. 

Petro-Canada also will pay Libya a $1 billion “signature bonus” – basically a “thank you” – for continuing to allow the company access to oil-rich Libya, where Petro-Canada estimates there are gross resources of almost 2 billion barrels associated with the redevelopment program.

Petro-Canada also will invest an additional $460 million over the next seven years to continue exploration in Libya’s Sirte (Surt) Basin region, which holds half of all of Africa’s oil reserves, experts estimate. Seven of the last nine exploration/appraisal wells drilled in that region have struck oil.

The excellent odds of success is incentive enough for Petro-Canada to pay the inflated costs of the renegotiated deals – even to a country that is already one of the world’s richest.  Indeed, Libya’s economy is fueled by the country’s massive oil reserves, and also by the growing tourism industry in the Mediterranean Sea-bordering northern territories. While about 130,000 people now visit Libya as tourists each year, the Libyan government hopes to boost that figure to 10 million. To that end, the government has approved a multimillion-dollar renovation of key Libyan airports.

News and Related Links:

  • The Guardian:
    Libya says got better deal from Petro-Canada

  • Wikipedia:
    Libya economy