Libya Govt Grants Cabinet More Power Over Oil Sector

DUBAI (Zawya Dow Jones), Oct. 5, 2009

Libyan government encroachment into its oil sector prompted the resignation of the country's top oil official in late August, after the government gave greater powers over the industry to a group headed by the Libyan cabinet, a person familiar with the matter told Zawya Dow Jones this week.

Although Libya's National Oil Corp. announced Wednesday that it had appointed a new secretary of the NOC's Management Committee, the secretary will be a placeholder as acting chairman until a permanent successor to former NOC Chairman Shokri Ghanem is appointed, a person familiar with the matter told Dow Jones Newswires.

Ghanem's resignation followed a series of government decisions that reduced his role in Libya's oil industry and ceded more industry oversight to the prime minister and cabinet. The chairman's departure took international oil companies by surprise, the person said. Who will emerge as Libya's top oil official remains an open question, but international oil companies are concerned by the reshuffle at the state oil firm, analysts said.

"Ghanem was an institution in the industry," said an analyst in the region, who asked not to be named. "The (international oil companies) knew him and trusted him. His departure underscores uncertainties about doing business in Libya."

The approval of a new Supreme Council of Energy Affairs by the General People's Committee in early August, headed by Prime Minister Baghdadi Mahmudi and made up of cabinet ministers, is the primary reason that led Ghanem to resign, the person said.

"They established a new Energy Council and gave them wide, sweeping powers in negotiating with oil companies, in concluding agreements, even going into the small details, which meant reducing Ghanem to a small employee rather than an ex-prime minister with clout in the oil industry," the person said.

The government's role in the sale of Canadian oil producer Verenex Energy Inc. (VNX.T) to the Libyan Investment Authority for about $316 million also added to the frustrations when cabinet ministers started interfering and discussing the deal outside the company, the person said.

"The Verenex story also contributed to the decision taken by Ghanem to resign. Members in the cabinet discussed the Verenex issue outside NOC," the person said.

The General People's Committee didn't respond to a message Thursday seeking comment, and Libyan Investment Authority Executive Director Mohamed H. Layas declined to comment on the matter.

Libyan leader Col. Moammar Ghadafi has not yet named a new permanent NOC chairman, the person familiar with the matter said Thursday.

Libya's National Oil Corp. announced Wednesday on its Web site that Ali El Sogher Mohamed Saleh was appointed secretary of the NOC's Management Committee. But the person familiar with the matter said El Sogher was effectively replacing senior NOC board member Azzam Ali Elmesallati as acting chairman - a role Elmesallati had briefly filled after Chairman Ghanem's sudden departure. El Sogher had already been running the company's day-to-day operations as general manager since Ghanem quit, the person said.

"Sogher is now the acting chairman; he has taken over from Elmesallati," the person familiar with the NOC chairman's resignation said, but declined to give reasons for why this took place.

El Sogher was unavailable for comment.

Senior adviser Ahmed Elghaber at NOC was unavailable for comment, but two NOC employees who didn't provide their names when answering calls Thursday at the company said El Sogher's appointment as secretary of the NOC's Management Committee makes him the new acting chairman.

While Ghanem held the top post at the NOC, international oil companies came to view him as a reliable intermediary in their dealings with Libya, holder of the biggest proven oil reserves in Africa. Ghanem, 66, served on the board of NOC intermittently since 1968. He also served as Libya's prime minister from 2003 to 2006 and as the Organization of Petroleum Exporting Countries' acting secretary general from 1999 to 2001.

Ghanem was one easily approachable, dependable contact for international oil companies that now will have to go through more people in Libya, which makes it more difficult to reach agreement, said John Hall, chairman of Energy Quote.

"It is unfortunate Ghanem is gone because his successor won't have the same sort of authority but will have to go through a committee who may not be as forthcoming as one individual would have been," Hall said.

Despite the influence of politics in such decisions, the chairman's position will likely go to a candidate with a thorough understanding of the oil industry, said the person familiar with the matter.

"At present, the government is still undecided on who will replace Ghanem, and people are still nominating and lobbying for the position," the person said.

Ghadafi's sons could be in the running for the NOC chairman role, though it's unclear which of the Libyan leader's sons might be considered for the post, the person said.

Speculation that Ghanem had resigned first surfaced in Vienna when Dow Jones Newswires reported in early September that he wouldn't attend OPEC's ministerial meeting there. El Sogher stepped in as head of Libya's delegation.

Some international oil companies are calling for Ghanem to return to the position, but he is unlikely to return to NOC or work in government, the person said. Ghanem also had desired for some time to retire from public life, wanting to return to academia and spend more time with his family, the person said.

Ghanem's replacement at NOC will step in as the country works to maximize its oil industry's potential. Libya aims to boost its oil production to 3 million barrels a day by 2015 from its current level of around 1.6 million barrels a day. The hydrocarbons industry accounts for 95% of Libya's export earnings and 25% of gross domestic product in the North African state. It also provides 60% of public wages.  

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