Libya - Waha Oil May Expand Production Capacity With Help Of US Partners.

APS understands that Waha Oil Company (WOC), a subsidiary of Libya's state-owned National Oil Corp. (NOC), is preparing for a role by US companies in the expansion of its oil and gas production capacity. The companies, Conoco, Marathon Oil and Amerada Hess, would at first be represented by non-US subsidiaries pending a lifting of the US sanctions against Libya.

This could be the first step for them and the other US firms to return to the country, with the US sanctions likely to be lifted by 2001.

WOC is the second largest among NOC's oil producing subsidiaries. Its output capacity has dropped from 500,000 b/d in the 1980s to 375,000 b/d. It intends to raise the capacity to 450,000 b/d by 2002. Its immediate project is to develop the Farigh field (in the Waha basin, with work to begin in late 2000, to produce 31,000 b/d of oil and 100 MCF/day of gas.

Non-US units of the three US companies could be involved in this as contractors in the initial phase. Once the US sanctions have been lifted, the three parent US firms would revive the Oasis Oil Co., which used to be their producing JV in Libya.

WOC was created by NOC to take over the operations of Oasis Oil Co. which until 1986 used to be owned 59.2% by NOC, 16.3% by Conoco (operator), 16.3% by Marathon and 8.2% by Amerada Hess. WOC was the worst sufferer of the US embargo, because its fields were equipped mainly with old US-made machinery for which it could not get spare parts.

Conoco has in recent months been quietly negotiating with NOC the possibility of the US major returning to operate WOC fields through a European unit. The understanding was that, when Washington lifts its sanctions against Libya, a US parent will take direct charge in partnership with the two other US companies.

Libya now is producing about 1.3m b/d, compared to a sustainable capacity of a little over 1.5m b/d and an OPEC quota of 1.227m b/d. Its capacity by 2000 is not likely to reach the 2m b/d target set by the political leadership in recent years. The country's international isolation ended on April 5, 1999, when the UN Security Council suspended sanctions based on resolutions 731 (1992), 748 (1992) and 883 (1993) - after Tripoli released the two suspects in the Lockerbie airliner bombing for trial by Scottish prosecutors at Camp Zeist, the Netherlands. Their trial will begin in February 2000.

With a rich geology, Tripoli has promised to make its E&P regime more attractive in order to bring in the biggest number of foreign investors possible as well as the US companies. Officials from NOC used an oil and gas conference in Geneva in April 1999 to highlight forthcoming changes to the country's 40-year-old Petroleum Law, with new E&P and downstream incentives to be announced in early 2000 (see survey of Libya and who's who in this volume's Nos. 1-4).