Libyan And Iranian Oil Ventures Ahead For U.S. Companies

While the major media spends most of their time covering the Kerry campaign, a major set of developments is moving at a much faster than expected speed toward reality. U.S. oil companies may be on the verge of re-establishing beachheads in Libya and Iran.

On 2-24, we wrote: "U.S. oil companies are about to return to their old stomping grounds in Libya, and Iran. After all, oil is thicker than ideology."

Our record is clear on this issue. As far back as "Successful Energy Sector Investing," we had noted that Libya was an unknown quantity that could provide surprises. On 8-22-03, in this space, we noted that U.S. oil companies were extremely interested in returning to Libya and that they were describing Libya as ["geologically attractive,"] while adding {"obviously we are very much interested in returning to Libya as soon as the Libyan and United States' governments permit us to do so."]

And that day may be upon us. According to a Reuters report, again largely ignored by the major media: "U.S. oil company representatives are expected in Libya by the end of the month, the Libyan foreign minister said Tuesday, as Tripoli seeks to quicken the end of U.S. sanctions. ["We are waiting for an American delegation to come here at the end of the month,"] said Mohamed Abderrhmane Chalgam, the Libyan Foreign Minister. ["When America comes here our production will be better and we will have American technology,"] he told a press conference. The Unites States has not imported Libyan oil since 1982, and has not had any kind of formal trade with the African nation since 1986.

Reuters described the situation as one in which “early discussions are expected to focus on U.S. assets left frozen by the embargo, but there is no timetable yet for a full return. They include concessions held by Marathon Oil, ConocoPhillips, Amerada Hess, and Occidental Petroleum.

"To the extent we are allowed a greater degree of travel to Libya, we would certainly take that opportunity to maintain our good relations with the Libyan national oil company," said Jay Wilson, spokesman for Amerada Hess.

The article added that "Marathon, ConocoPhillips and Amerada Hess, which make up the Oasis Group, have been in continued discussions with Libya to extend their soon-to-expire Libyan oil leases, left dormant since U.S. sanctions forced them to pull out. Most of the 50-year oil leases are set to expire in 2005. The Oasis Group's oil output in Libya peaked at over a million barrels per day in 1969.

U.S.-Iran Oil Deals Can't Be Too Far Behind

On 2-24, we quoted the following from ["Japan and Iran on Feb. 19 finally sealed a $2 billion deal on the 26-billion-barrel Azadegan oil field. The announcement marks the beginning of an Iranian oil rush -- not because the Japanese have arrived, but because the Americans are about to. The finalization of the deal has nothing to do with the skill of Japanese diplomats and everything to do with the ongoing rapprochement between the United States and Iran."]

Thus, it is more than interesting that as we looked for confirmation, we found a 2-23 report on the World web site, citing Middle East Newsline as the source, that read: "Iran said it has received interest from U.S. companies to bid on new oil contracts in the Islamic republic. Iranian officials said several unnamed U.S. companies have relayed interest to participate in the tender for 16 oil blocks. The project is being headed by the state-owned National Iranian Oil Co. and the deadline for bids is July 10."

According to the report, "the company's director, Mohammad Mohaddes, said the U.S. companies discussed their desire to participate in the tender during a seminar in January in the Netherlands. The U.S. government and companies cannot engage with foreign firms that invest more than $20 million in Iran's energy sector. ["There is no problem on the side of Iran for the presence of American oil companies in these plans,"] Mohaddes said.

And perhaps an even bigger sign that there is indeed movement in Tehran toward a U.S. oil presence in the Islamic republic, according to a situation report: "Akbar Hashemi Rafsanjani, chief of Iran's powerful Expediency Council, said Feb. 24 that he approved of the idea of dialogue with the United States, but Supreme Leader Ayatollah Ali Khamenei was opposed to it, the daily Kayhan reported. Rafsanjani was quoted as saying, ["For me, talking is not a problem. But this is only if it was for me to decide on personally."] The former Iranian President went on to say that -- because the late founder of the Islamist regime Ayatollah Khomeini and his successor were against the idea -- ["I follow them and I say nothing."] He added that there were no new developments in U.S.-Iranian relations as Washington continues to talk about Iran on the issues of nuclear weapons, support for terrorist groups, human rights and the Middle East peace process."

But, by saying "nothing" out loud, Rafsanjani may be saying a whole lot more.

Stocks are oversold. And while a bounce is possible, there is no guarantee that it will be robust, or that it can last.

The Philadelphia Oil Service Index (OSX) continued to ignore the overall pull back tendency in the market. OSX continues to show relative strength. The index is testing out the 103 area break out point. OSX is remaining among the strongest sectors in the market. The index broke above a long term resistance point, 103, on 2-10-04, signaling that the oil service stocks could be about to explode to the up side, as it has continued to move steadily higher. A continuation of the current move could the index to 110. A long term move, if this move gains momentum could take the OSX to 140. The index rallied smartly on 1-20, and has reached an important resistance level, but had remained flat. For more details on trading the energy sector visit our energy timing page, featuring our highly effective OIH timing model and our Top Ten Energy Stock List.

The Amex Oil Index (XOI) made a quiet new high on 2-23, but mostly marked time on 2-24. The index closed last week above 580, also showing some relative strength. A move to 600 in the short term is still possible, if XOI can deliver a close above 580. For immediate analysis, including stock picks, and the latest in technical analysis of the entire energy complex, our subscriber section has a full complement of recommendations in oil service and the rest of the energy complex.