- The oil multinational Royal Dutch/Shell has signed an agreement to re-enter the oil and gas industry of Libya at an estimated values of almost US$ 1 billion. The Anglo-Dutch oil giant announced the deal as British Prime Minister made a historic visit to Libya yesterday.
Shell in a press statement announced has announced a "landmark heads of agreement" for the establishment of "a long term strategic partnership in the Libyan upstream oil and gas industry." Analysts hold the cooperation deal between Shell and Libya's National Oil Corporation is worth up to US$ 1 billion.
According to Shell, the agreement comprises the preliminary understanding of the parties regarding key principles for participation by Shell in the Libyan upstream, including onshore exploration, and the development of liquefied natural gas facilities. The deal further could lead to the development of world-class integrated upstream and liquefied natural gas export projects, the Shell statement said.
Shell was active in the Libyan oil industry from the 1950s until 1974, and conducted exploration in the country in the late 1980s. With the rupture of British-Libyan diplomatic relations and international sanctions against Libya following several terrorist attacks in Europe attributed to Tripoli, Shell ceased its operations in Libya.
Also the Shell communiqué refers to the new deal coinciding with the visit of UK Prime Minister Blair, to meet with the Libyan leader, Colonel Muammar Gaddafi. Mr Blair's visit symbolises the reestablishment of normal diplomatic ties between Britain and Libya and has also served as a door-opener for British companies wanting to invest in Libya. Shell is to become the by far largest single investor until now.
The Libya visit of Prime Minister Blair, combined with the warm welcome he received and the friendly tone between the two leaders, has caused strong negative reactions in London, where the visit is seen as premature. The British conservative opposition said visit had a "quite odd timing" as Mr Blair was travelling from the memorial service commemorating the Madrid terrorism victims; to his Tripoli meeting; and from there to an EU summit in Brussels on terrorism.
The British are however far from the first European nation to completely normalise diplomatic and economic relations with Libya. Both the Heads of Government of Spain and Italy recently have visited Colonel Gaddafi in Tripoli. International oil companies already present in Libya include Eni of Italy, Repsol of Spain and Greek, Austrian and Australian companies.
Shell will however become the largest European player in Libya, as the stakes are now. The newly signed agreement will also boost the British-Libyan trade link. Malcolm Brinded of Shell in a statement yesterday confirmed he looked forward "to our cooperation becoming a cornerstone in a renewed trade relationship between the UK and Libya."
Shell was in a hurry to complete a favourable deal with Libya before the US government lifts its trade sanctions on Libya. US oil companies are believed to gain a major role in the Libyan oil and gas industry, in particular in the production of crude oil. While US sanctions are still in place, Washington has given US companies a green light to start negotiating future Libyan deals and the first US oil company, Occidental, is already present in Libya.
Libya urgently needs foreign investments and technology to develop its oil and gas industry, which has stagnated since the imposition of sanctions. The country in particular has a large unexploited potential in technology demanding offshore oil and gas production.
While the US demand is greatest in oil products, Libya can count on a growing European gas market. Most of continental Europe and Britain is connected in a gas network, which is emerging the main household energy source in many countries. This market was still relatively small as the sanctions were imposed and Libya's gas industry is therefore underdeveloped.
The timing is also good for the British government and for Shell. Britain needs to find more gas suppliers in the region as its own North Sea reserves are drying up. Shell also needed a good Libyan deal to step out of the crises that have plagued the company lately, including a sudden depreciation of its oil and gas stocks and irregularities in company accounts.
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