Following a year and a half of political and military delays, BP is poised to pick up where they left off in Libya, joining the roster of international firms hoping to make the most of Africa’s largest proven oil reserves. Despite the presence of many of the same obstacles that put a halt to their efforts in the North African country in the summer of 2010, BP officials remain confident that they will soon be able to achieve the production goals they set out almost five years ago.
The result of a $900 million deal made in 2007, the BP’s Libyan projects were expected to receive more than a billion dollars worth of company investments over the next seven years. The original agreement outlined an exploration project that would cover 54,000 square kilometers of the onshore Ghadames and offshore frontier Sirt basins, allowing for 20 appraisal wells if initial efforts were deemed successful, according to company literature. The company’s Libyan presence would include both on and offshore efforts, allowing for the company’s first projects in the country since 1971 when the new government nationalized all of BP’s assets.
However, those efforts soon came under fire, initially due to allegations that the company had pushed UK political figures to support the release of the convicted Lockerbie bomber, Abdelbaset Al Megrahi in exchange for the new contracts. Facing calls for project delays from both the US and UK, the company worked to calm political waters, but soon found themselves at the center of the year’s largest environmental disaster. Confidence in the company’s safety record took a hit during the summer of 2010 after the company’s connection to the Deepwater Horizon spill in the Gulf of Mexico spurred a sharp backlash among EU environmental and political groups. The backlash forced a delay in activity, just as BP was concluding a sprawling seismic survey of their offshore licenses. EU political figures began demanding for greater oversight of BP activities in the Mediterranean as well as proof of the company’s capabilities to financially address a possible spill.
However, Lockerbie and environmental concerns took a backseat during the summer of 2011 when Libya’s political environment became too unstable for BP to keep their expatriate staff in place. As anti-Gadaffi forces moved west from Benghazi, followed by the arrival of supporting NATO forces, violence forced a complete halt in production and export efforts, resulting in an evacuation of all international staff by foreign firms.
Now nearly four months after Gadaffi’s death and the recognition of the country’s transitional government as the Libya’s legitimate political leaders by even ardent critics of the anti-government movement, BP is focusing on building their earlier efforts. However, obstacles to a full return remain.
“We are making preparations (we still have just under 100 local staff) to resume our activities but the security situation is still too uncertain,” remarked BP media representative Robert Wine last week. Although members of the transitional government have worked to calm worries about lingering violence, some foreign firms have not reached a level of confidence in the country’s ability to ensure the safety of their workers. Other international firms have been quicker to return to their Libyan efforts, including Spain’s Repsol, France’s Total and notably Italy’s Eni who have come close to reaching pre-conflict production levels.
“We do intend to pick up where we left off, but the circumstances on the ground have to be safe first,” Wine wrote, adding, “Security means safety for anyone working there. Until then, we won’t ask people – not just international staff – to work where it’s dangerous.”
Responding to whether BP foresaw any obstacles to working alongside the country’s transitional government, who have previously offered strong warnings against countries and companies that had previously worked with the Gadaffi government, Wine wrote that he was confident they would be able to work for and with them to fulfill their contracts.
A quick and stable return to Libya may help BP restore some of the investor confidence lost in light of their involvement in the Deepwater Horizon spill and its subsequent lawsuits. Currently facing 600 civil lawsuits from plaintiffs across United States Gulf Region, BP has announced its intention to vigorously fight the cases, though they have allowed that the ongoing legal issues have curtailed interest from investors.
“We have many people who do say, we are interested in investing in BP but not until all this is behind you,” CEO Bob Dudley told a press conference last week, according to the Financial Times.
For now, BP will be able to build upon a return to higher profits with the announcement of $23.9 billion last week, as lower production levels and delayed projects were offset by higher oil prices throughout last year. According to the AFP, the earnings report was accompanied by a higher company dividend, suggesting confidence among company management that any challenges BP faced in the new year were manageable. However, facing a lengthy challenge in US courts, the UK company could likely use all the support it can get.
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