Shell to Exit Libyan Exploration Blocks due Insecurity

Royal Dutch Shell PLC Monday said it was exiting its Libyan exploration blocks amid insecurity and harsh contracts, the first such move since Gadhafi’s overthrow.

The Anglo-Dutch giant insisted it was still interested in the country, which holds Africa’s largest oil reserves.

But the move casts a cloud on Libya’s oil recovery as Shell had originally planned sizable investments in the blocks.

Shell “intends to suspend and abandon drilled wells and stop exploration in [its] Libyan licenses,” a company spokesman said, confirming an internal email seen by Dow Jones Newswires.

Libya’s oil production has fast recovered since the toppling of strongman Moammar Gadhafi last year. But foreign companies complain of tough contracts and of persistent insecurity.

The deals, which the new government says it won’t change, had already led to the exit of several companies under the old regime. Others, like Germany’s Wintershall AG, have warned the terms could impede decisions on new investments.

The Shell spokesman said exploration “results [prior to the war] have been disappointing and further exploration cannot be economically justified,” he said.

In 2004, Shell signed preliminary deals with Gadhafi’s regime potentially worth billions of dollars of investments, from exploration to a possible liquefied natural gas plant.

After interrupting its operations when the civil war started in early 2011, Shell had previously said it was studying a return to Libya.

But insecurity, including frequent attacks on oil officials, contributed to its decision to abandon the exploration blocks, according to people familiar with the matter.

British oil giant BP PLC, which signed a $900 million exploration deal in 2009, has yet to resume operations in part due to insecurity, while other companies have kept the return of expatriates to a minimum. However, a BP spokesman said it still intends to return to Libya. In an internal email, Shell Libya said “severance packages will be offered to all staff.”

But the email said it “will actively continue to engage with the [National Oil Co.] and Libyan authorities to explore other business opportunities.

“This is not a country exit, and a Shell Representative Office will remain in Libya,” it added.

Source: Rigzone

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