New Delhi: Oil India Ltd (OIL), the state-controlled company that has the rights to explore oil in Libya, plans to ask consortium partner Algeria’s Sonatrach to lobby rebel leaders in the north African nation to honour the company’s contracts after the overthrow of Moammar Gadhafi’s 42-year rule.
“We will take up with Sonatrach to raise the issue with the new government,” said a senior OIL executive who did not want to be identified.
The move comes at a time when oil companies, including Marathon Oil Corp., BP Plc, Royal Dutch Shell, Total SA and Repsol YPF SA, that were active in Libya before the war are now preparing to restart operations. The African nation is estimated to have around 100 billion barrels of oil reserves, accounting for 40% of Africa’s reserves.
While OIL is in the process of surrendering two blocks in which it holds 50% stake each because it couldn’t find commercial-scale hydrocarbon reserves, it still owns a 25% participating interest in three blocks with Sonatrach. While questions emailed to Sonatrach on Wednesday remained unanswered at the time of filing the story, a top OIL executive, who also requested anonymity, said “we are trying to take up the issue at different levels”.
“We have taken up the issue with the government of India and told them that it is worthwhile to go back,” the executive said. “We are getting situation reports from there. We are in touch with our partners Sonatrach.”
Last month, India signalled it has recognized the end of the Gadhafi regime, when it offered to help with relief and reconstruction in Libya. But New Delhi stopped short of formally recognizing the rebel-led Transitional National Council as Libya’s new government as fighting was still continuing between rebel forces and government troops after the fall of Gadhafi’s capital Tripoli.
OIL is present in five Libya blocks. It is an operator in two blocks, Area 86 and Area 102/4, which it acquired through competitive bidding. The Indian oil explorer is in the process of relinquishing these blocks. It is also present in three blocks in Area 95/96 in a consortium in which Sonatrach, the national oil company of Algeria, is the operator. OIL holds 25% participating interest in these blocks on which work is in progress. The company has made an overall investment of $45.05 million (Rs 207.2 crore) in the five blocks. Another state-owned firm ONGC Videsh Ltd, the overseas unit of Oil and Natural Gas Corp. Ltd, has a block in Libya.
“India will need to move rapidly to build political and diplomatic bridges with the new regime in Libya if it wishes to pursue oil interests,” said Gokul Chaudhri, partner at consultant BMR Advisors. “There are number of interested countries which have actively supported the movement backing the new regime and they would have a head start.”
Russia on Thursday recognized the overthrow of the Gadhafi regime. “The Russian Federation recognizes the National Transitional Council of Libya as the ruling authority and notes the programme of reforms announced by it, which envisions developing a new constitution, holding general election and forming a government, ” the government said in a statement.
India was one of the five United Nations Security Council members that had abstained when the council voted to establish a no-fly zone over Libya and also authorized military action against the Gadhafi regime.
West Asia and Africa meet nearly 75% of India’s oil requirements. Pro-democracy and civil rights protests have swept across the region since December, spreading to Libya, Algeria, Syria, Jordan, Yemen, Oman and Bahrain, among other nations. Sporadic protests have also taken place in Saudi Arabia.
Though India imports very little crude oil from Libya, it aims to secure overseas energy assets as it imports more than 80% of its crude oil requirements. After the extreme volatility of crude oil prices in 2008-09, prices have consistently risen in the recent past, according to India’s oil ministry.
The average price of the Indian basket of crude oil, which was $69.76 per barrel in 2009-10, is hovering around $112 per barrel in the current year.