For Big Oil, the Libya opening that wasn’t

The Wall Street Journal reports: As Libya’s Moammar Gadhafi fell last year with the help of the West and an interim regime took the reins, the hope among some oil companies was that they would receive new tax breaks and a better share of fields’ output in current and future deals.

But the interim government in Libya, as well as administrations elsewhere, largely plan to keep the same tough terms in place for most conventional fields, as governments are mindful not to appear to be selling out their countries’ crown jewels.

New opportunities lie mostly in so-called unconventional projects, which are especially expensive or require advanced technology to develop. Higher oil prices are needed for such projects to pay off, making them riskier and less profitable than those available to national oil companies.

For such projects in Libya, investment conditions “can be improved,” Libyan Oil Minister Abdulrahman Benyezza said in a recent interview.

For decades, many European companies had enjoyed deals that granted them half of the high-quality oil produced in Libyan fields. Some major oil companies hoped the country would open further to investment after sanctions from Washington were lifted in 2004 and U.S. giants re-entered the North African nation.

But in the years that followed, the Gadhafi regime renegotiated the companies’ share of oil from each field to as low as 12%, from about 50%. Libya’s state-owned National Oil Co. continues to get the bulk of the barrels produced in joint ventures with oil majors.

Just after the fall of the regime, several foreign oil companies expressed hopes of better terms on existing deals or attractive ones for future contracts. Among the incumbents that expressed hopes in Libyan expansion were France’s Total SA and Royal Dutch Shell PLC.

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