Analysis: Libya's oil contracts to be unsure for months more

Wed Mar 28, 2012 6:07am EDT
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By Jessica Donati

LONDON (Reuters) - Uncertainty about oil and gas companies' contracts with Libya, soon to be scrutinized and potentially revised, will persist until new leaders take power after June elections, delaying the industry's return to normal in the post-Gaddafi era.

The transitional government has set up a special committee to investigate allegations of widespread corruption in the oil industry before the revolution unseated Muammar Gaddafi. Its determinations could lead to the withdrawal or reworking of now lucrative deals in the OPEC member, which has Africa's largest crude oil reserves.

In the June elections, Islamist and secular parties will compete for seats in a national assembly, which will draft a new constitution for the country.

Libya's deputy oil minister told Reuters this week that existing agreements with international oil companies must be examined before any new blocks or contracts can be offered.

"First we need to evaluate the outcome of the existing agreements and contracts," said Deputy Minister Omar Shakmak.

"At this stage, we need to have some more studies and involve all the people with experience in the oil industry."

Oil company executives say they expect the new leaders to demand that certain deals be revised. For now, while the political and legal landscape is in flux, they are keeping a low profile.

"Official declarations have not been consistent over time, but certainly they are going to revise contracts according to the best interests of the country," an executive at a European oil major and one of Libya's largest foreign oil producers said, speaking on the condition of anonymity.   Continued...