Shell to Exit Libyan O&G Blocks

Shell to Exit Libyan O&G Blocks'

LONDON - Royal Dutch Shell PLC Monday said it was exiting its Libyan exploration blocks amid insecurity and harsh contracts, the first such move since Gadhafi's overthrow.

The Anglo-Dutch giant insisted it was still interested in the country, which holds Africa's largest oil reserves.

But the move casts a cloud on Libya's oil recovery as Shell had originally planned sizable investments in the blocks.

Shell "intends to suspend and abandon drilled wells and stop exploration in [its] Libyan licenses," a company spokesman said, confirming an internal email seen by Dow Jones Newswires.

Libya's oil production has fast recovered since the toppling of strongman Moammar Gadhafi last year. But foreign companies complain of tough contracts and of persistent insecurity.

The deals, which the new government says it won't change, had already led to the exit of several companies under the old regime. Others, like Germany's Wintershall AG, have warned the terms could impede decisions on new investments.

The Shell spokesman said exploration "results [prior to the war] have been disappointing and further exploration cannot be economically justified," he said.

In 2004, Shell signed preliminary deals with Gadhafi's regime potentially worth billions of dollars of investments, from exploration to a possible liquefied natural gas plant.

After interrupting its operations when the civil war started in early 2011, Shell had previously said it was studying a return to Libya.

But insecurity, including frequent attacks on oil officials, contributed to its decision to abandon the exploration blocks, according to people familiar with the matter.

British oil giant BP PLC, which signed a $900 million exploration deal in 2009, has yet to resume operations in part due to insecurity, while other companies have kept the return of expatriates to a minimum. However, a BP spokesman said it still intends to return to Libya. In an internal email, Shell Libya said "severance packages will be offered to all staff."

But the email said it "will actively continue to engage with the [National Oil Co.] and Libyan authorities to explore other business opportunities.

"This is not a country exit, and a Shell Representative Office will remain in Libya," it added.

Copyright (c) 2012 Dow Jones & Company, Inc.


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Abdusalam Azedani | May. 30, 2012
First, when Shell signed its contracts and accepted those terms, was Shell predicting the 17th of February Revolution? Because Shell is not happy with those terms now!! That I do not really understand. Then, I personally, do not think the move of Shell cast any cloud on Libyas oil recovery, because Libya prior the WAR was producing about 1.7 barrels/day of crude oil, and more than 10 billion m3/year of natural gas. And as a matter of fact Libya does not need to produce more than 2 million barrels day of crude oil as maximum, and that figure can be reached by Libya’s local companies and their long term foreign partners and other interesting parties on the queue. However, sustaining the 2 million barrels/day as a max production target, it is in the interest of Libya and its coming generation, even from the current economical and post war situation, there is no need for any higher production. Furthermore, most companies looking for easy money I would say, because the cost of production of the onshore oil in Libya is very cheap and with moderate capital investment!!! And those expat companies which are looking for better terms and higher share in the Libyan oil, I think is led by Greed, as there are too many opportunities in the downstream oil and gas industry, why not coming there? Moreover, I do not believe that is even proper to talk about those contracts and pulling out now, because nor new parliament, neither elected government and even the new constitution have been established (which are on the way). Thus, the current government has no legitimacy to change/alter or sign new contract. Are we pushing here for illegality and corruption as happened in Gaddafi era? Finally, the security issue is true and the climate is not yet ok for full resumption with the new contracts or full activities, I agree. Therefore, we should wait and try to understand the situation and help the Libyan people in any way we can, and I am sure there is always a middle way that both parties can meet and agree.

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