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Viewing cable 09TRIPOLI825, LIBYAN NATIONAL OIL COMPANY CHAIR CONFIRMS ACTING STATUS, PLEDGES CONTINUITY REF: A) TRIPOLI 779; B) TRIPOLI 765; C) TRIPOLI 775; D) TRIPOLI 778 TRIPOLI 00000825 001.2 OF 002

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Reference ID Created Released Classification Origin
09TRIPOLI825 2009-10-18 09:09 2011-01-31 21:09 CONFIDENTIAL Embassy Tripoli
VZCZCXRO2862
PP RUEHBC RUEHDE RUEHDH RUEHKUK RUEHROV
DE RUEHTRO #0825/01 2910909
ZNY CCCCC ZZH
P 180909Z OCT 09
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC PRIORITY 5368
INFO RUEHOT/AMEMBASSY OTTAWA PRIORITY 0034
RUEHGA/AMCONSUL CALGARY PRIORITY 0011
RUEHRO/AMEMBASSY ROME PRIORITY 0627
RUEHMO/AMEMBASSY MOSCOW PRIORITY 0091
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHEE/ARAB LEAGUE COLLECTIVE
RHEHAAA/NSC WASHINGTON DC
RUEHTRO/AMEMBASSY TRIPOLI 5915
C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000825

 SIPDIS

STATE FOR NEA/MAG; STATE PLEASE PASS USTR FOR PAUL BURKHEAD; COMMERCE FOR NATE MASON; PARIS AND LONDON FOR NEA WATCHERS E.O. 12958: DECL: 10/18/2019 

TAGS: EPET PGOV LY EFIN PREL

SUBJECT: LIBYAN NATIONAL OIL COMPANY CHAIR CONFIRMS ACTING STATUS, PLEDGES CONTINUITY REF: A) TRIPOLI 779; B) TRIPOLI 765; C) TRIPOLI 775; D) TRIPOLI 778 TRIPOLI 00000825 001.2 OF 002 

CLASSIFIED BY: Gene Cretz, Ambassador, U.S. Embassy Tripoli, U.S. Department of State. REASON: 1.4 (b), (d)

1. (C) Summary: Ali Sugheir, the current head of Libya's National Oil Company, clarified that he was still the Acting Chairman of the NOC; a recent Libyan Government decree simply formalized his acting status. Sugheir plans to follow the policies of his predecessor, Shokri Ghanem, continuing with the conversion of all IOCs' contracts to EPSA IV contracts, and casting a recent decree requiring foreign companies to hire "regional managers" as an attempt to address Libyan unemployment problems. Sugheir dismissed reports that the new Supreme Council for Energy would affect the NOC's operations, stating that it was simply an expansion of a previous council. Sugheir also reaffirmed the NOC's partnership with PetroCanada, stating that recent production cuts were due to OPEC quotas and had also affected Libyan-owned companies. Sugheir stressed, as he had in a previous meeting with emboffs, that the change in leadership would not affect the NOC's daily operations. End summary.

2. (C) On October 13, the Ambassador met with Ali Sugheir, the current head of Libya's National Oil Company (NOC). Sugheir clarified that he was still serving as the Acting Chairman of the NOC and had not been officially approved as Shokri Ghanem's permanent replacement; the recent decree on the NOC website simply formalized Sugheir's acting status (Ref A). He had no idea how long he would remain in the position. (Note: Some industry insiders believe the General People's Congress would need to officially approve Sugheir as Chairman, but its next regular meeting is not expected until March 2010. End note). Reiterating a theme he expressed in a recent meeting with PolEcon Chief, Sugheir said, "it's business as usual at the NOC," and that he and his colleagues were working as a team (Ref B). Perhaps as a demonstration of the team approach, Sugheir invited to our meeting several of his colleagues from the NOC Management Committee, including: Azzam Eli Elmesallati, in charge of Investment and Joint Ventures; Ahmed al-Ghabir, Advisor to the Management Committee; Abdelgazem Shanguir, General Manager for Exploration and Production; and Ahmed Taghdi, Director for International Cooperation and Energy Information.

SUPREME COUNCIL FOR ENERGY AFFAIRS

3. (C) Sugheir said that the new "Supreme Council for Energy Affairs" headed by PM-equivalent Al-Baghdadi al-Mahmoudi was simply an expansion of the previous Supreme Council for Oil and Gas. The new council would have added responsibility for policies governing renewable energy and nuclear energy. Sugheir argued that the new council would not affect the NOC, as the NOC would still fall under the General People's Committee (Cabinet-equivalent). The intent of the new council, he said, was to place all energy-related departments and staff under one structure.

NEW REQUIREMENT FOR FOREIGN FIRMS TO BE HEADED BY LIBYAN MANAGERS

4. (C) Sugheir said that a recent decree requiring foreign companies to hire "regional managers" was an attempt to address unemployment in Libya, including many unemployed college graduates. He said the NOC had recently sent a "secret committee" to visit oil operations in the Libyan desert and conduct an employment study. The committee found that 80 percent of young engineers working in the oil industry were not Libyan but were from neighboring countries. However, he commented that, as a practical matter, the NOC was "busy with many other things" and had not focused on enforcing the requirement for a Libyan top manager in the IOCs.

5. (C) When asked how decreasing world oil prices would affect Libya's plans, Sugheir said Libya was "always going forward" and did not envision the return of the days of cheap oil. The NOC had just received approval from the GPC for a $12 billion investment plan for the next five years. It would focus on exploration and also include investments in developing fields operated by NOC-owned companies such as African Gulf Oil Company ("AGOCO" ) and Sirte Oil Company (which Sugheir used to run). While the overall focus would be on the Upstream side of the industry, investments in the "Mid-stream" would improve the pipeline networks. Sugheir noted Libya's goal of reaching a production of 3 million barrels per day by 2013 was still the target, and "maybe more." TRIPOLI 00000825 002.2 OF 002

6. (C ) Turning to the Exploration and Production Sharing Agreements (EPSAs), Sugheir said the NOC hoped to align all its foreign partners under EPSA IV agreements. He said almost all partners had done so but that Wintershall (German) and the Waha Group (US firms Marathon, Amerada Hess, and ConocoPhillips) had not converted to EPSA IV contracts. He characterized the EPSA IV system as a "happy medium for a working partnership" that was a "win-win" situation for both the NOC and its partners. He noted the NOC had accomplished moving to EPSA with the other major IOCs, which "created more comfort on our side," alleviating the Libyans' concerns that the IOCs would "take more than they should."

GAS SECTOR IN NEED OF NEW TECHNOLOGY AND INVESTMENTS

7. (C) The Ambassador asked whether the NOC was developing a national strategy for gas production, to which Sugheir replied that the GPC had requested the NOC create a policy for the domestic market. Presently, the NOC uses the international pricing model, but it is still under debate in Libya whether to separate the international and domestic markets. Azzam Ali Elmesallati (Investment and Joint Ventures) added that Libya did not yet produce very much gas and most of what it did produce went to the domestic market. He said that, under sanctions in the 1990s, Libya had been unable to upgrade its gas technology, but in the past five years the NOC has invested in new pipelines and revamping the gas sector.

VERENEX AND PETROCANADA: LIBYAN REVENGE ON CANADIAN COMPANIES?

8. (C) The Ambassador raised the issue of the recent experiences of Canadian oil companies Verenex and PetroCanada, noting that other firms -- including from the U.S., -- were concerned about the apparent inconsistencies in how standard business practices are applied in Libya (Ref C). This has led to the impression that Libya may not be a safe environment for investments. Sugheir replied that one could not compare the cases of Verenex and PetroCanada. Sugheir denied that PetroCanada was singled out and said that other NOC-owned companies also had implemented production cuts in order for Libya to comply with OPEC's quota of 1.3 million barrels/day. For example, AGOCO decreased its production by 60,000 b/d and Sirte Oil Company decreased by 20,000 b/d. Sugheir declared "our relationship with PetroCanada is solid" and "they are our partner." Responding to rumors that expatriate staff of PetroCanada might be deported, he said as a matter of policy, the NOC expected foreign companies to try to recruit Libyans for all positions. He noted that some Libyan university graduates had spent five years looking for work. If a foreign company could not recruit a Libyan for a given position, then it could bring in an expatriate to perform the job. As for Verenex (Ref D), he said the NOC had simply had a disagreement over the sales price that Verenex had proposed.

9. (C) Comment: As in his previous meeting with emboffs, Sugheir stressed to the Ambassador that this recent change in leadership would not affect NOC operations. Such assurances may be necessary to calm the nerves of skittish foreign investors, who believe Ghanem's departure was due to political infighting that has yet to be resolved. Many of the energy insiders believe Sugheir is only a placeholder appointment, and that a permanent replacement for Ghanem will be named only when the the political dust has settled. Recent news regarding Saif al-Islam Qadhafi's new position as "General Coordinator" likely will add more grist to the rumor mill regarding the NOC's future leadership and direction. As expected, Sugheir refused to acknowledge in any way the "political" dimensions" of the Verenx and Petrocanada situations which has led to general investor discomfort. End comment. CRETZ