LIBYA - The Oilinvest Background.

Oilinvest as a group emerged in the 1980s after Libya's acquisition of the two formerly Lebanese-controlled companies, Tamoil and Gatoil. Now Tamoil is the biggest unit in the group. It is not yet clear how Colony Capital will proceed in controlling Oilinvest and what role NOC will have in its operations, now that the latter only holds 35% in the group.

Tamoil, moving into African markets after it has consolidated its position in Europe, runs the group's petrol stations in Egypt. It has been seeking to have similar stations in Algeria, Tunisia and Morocco in the north, as well as in South Africa and other non-Arab countries on the continent.

There have been proposals for Libya to build a 150,000 b/d crude oil pipeline from Tobruk to Egypt's Mediterranean processing zone in Alexandria. Officials from both countries have said this would lead to the building of a 150,000 b/d refinery in Alexandria.

Oilinvest International NV consists of about 40 companies operating an integrated network in Europe. It was established in 1988 with a share capital of $450m then held equally by LAFB, Lafico and NOC. The ownership structure has since been changed several times, with NOC holding a controlling share before the coming of Colony Capital as a majority owner. Oilinvest has two fully-owned wings: Oilinvest (Netherlands) BV which heads a number of companies, and Oilinvest (Curacao) NV which leads another number of companies.

The structure was changed in late September 1993 so that the holding company for the group was limited to Oilinvest Netherlands BV. But since the UN lifted its sanctions in April 1999, the system has been reverted to the original one, whereby the units are led by two holding companies.

In the early 1990s Oilinvest's then Chairman Muhammad Abduljawad summarised the group's strategy as follows: "Oilinvest is establishing itself through joint ventures in different markets hoping to set an example as to how such an integration can lead to better and fair co-existence among different countries". This has led to Libyan integration with several European oil markets. One set of companies has concentrated on Italy, Switzerland, Spain, France and Hungary.

Another group, relying on the Holborn refinery in Germany and other Libyan sources of products, serve the markets of Northern Europe, mainly including Germany and Britain. In turn, each of these firms is affiliated with service companies.

ITALY: Libyan crude oil and products have accounted for more than 25% of Italy's requirements. Tamoil Italia, based in Milan, has a refinery at Cremona with a nameplate capacity of 105,000 b/d. This company has traded in almost 5m t/y of oil products. Related to it are Tamoil Petroli Italiana and two other affiliates: A. Bortolotti and F.A. Petroli, which have their own networks of oil storage and pipelines. The refinery is connected by pipeline to the port of Genoa and electricity stations run by Italy's main power utility Enel.

Oil products and lubricants are handled by about 2,100 Tamoil stations and the retail units of affiliated firms. The Rome-based Sirm, partly owned by Oilinvest, is responsible for maintenance of the service stations. Delta, based in Genoa, operates a nationwide bunkering service. Totam, based in Milan, supplies the city's Linate airport with aviation fuel. Thus Tamoil Italia by mid-2002 controlled almost 8% of the Italian petroleum retail market - the biggest in the Oilinvest system. The largest share in the Italian market, over 54%, was held by AgipPetroli of the ENI group.

In mid-2002 Oilinvest sold to AgipPetroli Tamoil retail networks in Central Europe which had a combined throughput of 1,000 b/d of motor fuels: Tamoil Praha in the Czech Republic, running 23 stations; Tamoil Slovakia, with six stations; and Tamoil Hungaria, with 11 stations. Already AgipPetroli had 40 stations in the Czech Republic and 71 in Hungary, but had no retail presence in Slovakia. In return for that deal, AgipPetroli gave Tamoil an important part of the Italian market, raising the latter's share in Italy to more than 10%.

Of importance to Tripoli since colonial days, Italy was a priority in Libya's downstream acquisitions during the 1980s. This was to match the involvement of Agip in Libya's upstream sector, with Agip and NOC now having an 11 BCM/year gas pipeline supplying the Italian market from Sicily since October 2004 (see gmt3LibGasExprtJul16-07).

Libya gained its first direct access to the Italian oil market in March 1986, when a group led by LAFB and LAFICO bought 74.68% of then Lebanese-owned Tamoil (named after the Tamraz family of Lebanon, with controversial businessman Roger Tamraz having been its last Lebanese CEO). Involving about 900 filling stations and a share in the Cremona plant, the purchase price then was around $100m. (The refinery was once owned by Amoco Italia).

LAFB and LAFICO financed a restructuring of Tamoil Italia (Milan/Rome) and Tamoil Trading (Zurich/Monte Carlo). The resulting group became one of the big ventures in Italy. In late 1987 Tamoil bought 755 filling stations from Texaco Italiana, a deal which gave it a 3% share of the Italian gasoline sector. Tamoil and Oilinvest in 1988 also acquired 50% in F.A. Petroli. This was later raised to 75%.

In September 1988 Oilinvest, via Tamoil, bought 75% in Vulcan Oil of Milan, which supplied about 1m t/y of heating gasoil and a 600,000 t/y bunkering service in Genoa. In October 1989 Tamoil bought 50% in Bortolotti & Co., then marketing 600,000 t/y of oil products in seven provinces.

A most important development after the creation of Oilinvest was its move into Germany. Oilinvest's first German deal, in 1988, was a 30% acquisition in Esso's then loss-making Holborn Europa Raffinerie in Hamburg. By 1989, Oilinvest had acquired a 89.5% equity in Tamoil and a network of 1,945 service stations as well as distribution centres throughout Italy. Gradually through the subsequent years, Tamoil's share of the Italian market grew via acquisitions and network expansions.

SWITZERLAND: Tamoil SA, based in Geneva, is a restructured version of Gatoil. Gatoil, once owned by Lebanese businessman Khalil Ghattas, was acquired in 1990 by the Libyans. In August 2002, its share of the Swiss market rose from 10% to almost 13% as it bought 177 retail stations from Total.

`Tamoil now owns a 70,000 b/d refinery at Collombey which has been upgraded.

The company trades in about 2m t/y of oil products and lubricants, now distributed through 608 service stations and 15 terminals.

GERMANY: The Holborn Europa Raffinerie has a plant in Hamburg with a capacity of 78,000 b/d (nameplate 80,000 b/d) acquired from Esso. Like the refineries mentioned above, it has processed Libyan crude oils and traded in about 4-5m t/y of oil products in North-West Europe (NWE).

Holborn has expanded in NWE including Britain. For this the refinery has added an isomerisation unit to reduce benzene and aromatics in gasoline. This unit's capacity is 7,500 b/d, on stream since early 2000. Holborn has also upgraded the refinery. Its output now is in line with EU specifications.

Holborn Europa trades in lubricants as well. The company has an annual turnover of over $1 bn. Its affiliates include a Dutch unit, Holborn Marketing, and two Cyprus-registered companies called Holborn Investment and Holborn European Marketing. Tamoil has a shipping company based in London which has a number of oil tankers.

MALTA: The island of Malta is of strategic importance to Libya's marketing effort in the Mediterranean. Chempetrol, owned by Oilinvest, has a rapidly growing share of the Mediterranean market. It has been primarily marketing Europe-bound methanol, fertilisers and other petrochemicals produced in Libya.

Sales of methanol and the other petrochemical products go to Italy, Spain, Holland, Portugal, France, Austria and Brazil. Chempetrol is also trading in oil products and lubricants.

FRANCE: Tamoil penetrated the French market in 1991 with the group's acquisition of Oil Energy France which was trading in 1.5m t/y of oil products. The company has since introduced a network of "flagged" outlets bearing the Tamoil brand name in France.

Oilinvest executives have been quoted in recent years as saying expansion in the French market was envisaged as a strategic priority. France plays a leading role in the EU.

SPAIN: The main operating arm in Spain is Oilinvest Espana, located in Madrid's prestigious Picasso Tower. Its affiliates are marketing oil products and lubricants through retail stations acquired by the group.

Oilinvest's objective in the 1990s was to gain 5% of the Spanish market. This was to involve acquisition of 360 stations in different parts of Spain, of which 160 were to be bought through gain contract; 50 were to be built from scratch; 50 were to be purchased from other owners; and 100 were to be flagged to display the Tamoil trademark.

Over 3,000 Stations: There are now more than 3,000 service stations and other retail outlets for the Oilinvest system in Europe, up from 2,400 at the end of 1992 and 2,767 at end-1993.

The group developed a major oil trading business in London, as one example, which was eventually to play an important role in the Oilinvest system. In recent years there were plans to expand overseas refining capacities to more than 500,000 b/d which were to process Libyan crude oils.

Among projects mentioned in recent years was a plan to further upgrade the Collombey refinery and increase its distribution units in Switzerland, a further expansion of the distribution system in Africa, and a big capital outlay for distribution units in Portugal, Monte Carlo, and the Netherlands.

Coinciding with the 2005 appointment of Hammouda Al-Aswad, Libya's OPEC governor, as chairman of Tamoil to replace Abdel Karim Ahmad who was fired for having sponsored the Italian football club Juventus and lost "a significant amount in derivatives trading", Petroleum Argus on June 27 said NOC could sell as much as 60% of Tamoil.

Argus said in 2004 NOC had raised its stake in Oilinvest from 45 to 70%. Argus mentioned Sa'di Al-Qadhafi, a son the Libyan ruler who is often described as a "football-mad" figure, in the context of an earlier press report which "described him as Tamoil's representative in Italy" (see who's who in next week's APS Review).

Edgo-Hamada is a 50-50 venture of the Amman-based Jordanian company called Edgo Group and NOC's wholly-owned subsidiary Hamada Pipeline Co. A merger of the two companies occurred in October 2001.

Edgo-Hamada provides pipeline services. These range from construction to coating, maintenance, inspection and repair of pipelines.

Its work has concentrated on Libya's system of pipelines. It is also to operate in other African countries.