It is a 30-year development deal to upgrade several of its existing petroleum contracts in Libya, including plans to spend $5 billion to increase production over the next five years
The new contract provides for a $1 billion signature bonus payable over three years, as Occidental eyes participation for the next three decades in fields containing "substantial" proven reserves covering 2.5 billion barrels of "high quality" oil reserves.
"This new project establishes Libya as a core country for Occidental's production and we believe it will open the door for us to add additional growth projects in a country with large oil and gas reserves," said Occidental CEO Ray R. Irani.
Under the new terms, Occidental will get a lower share of 10% to 12% of production - less than the traditional share of about 20% -- but profitability per barrel has improved with the onset of record high oil prices, Brian Hicks, co-manager of the Global Resources Fund, said.
"Even though Occidental is receiving less (share of) production out of Libya, the company is actually getting a higher per barrel return on an after tax basis that effectively offsets lower volumes," Hicks said. "The deal creates an entry point into one of the more prolific oil producing regions in the world."
Occidental began operations in Libya in 1965 and continued operating until U.S. sanctions were imposed in 1986.
The Los Angeles-based oil giant said it was the first U.S. company to resume oil operations in Libya after the U.S. sanctions were lifted in 2004.
In 2005, Occidental successfully bid on nine of the 15 areas available in the first EPSA IV exploration licensing round and is currently the largest holder of oil and gas acreage in Libya.
Overall, Libya plans to double its oil production to more than 3 million barrels a day in the near future.
Author:
Ksenia Kochneva
