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UNCLAS TRIPOLI 000498 SENSITIVE DEPT FOR NEA/MAG; COMMERCE FOR NATE MASON ENERGY FOR GINA ERICKSON E.O. 12958: N/A TAGS: ECON, EINV, EPET, CA, LY SUBJECT: PETRO-CANADA SIGNS 30-YEAR PACT WITH LIBYA REF: TRIPOLI 474 1. (SBU) Summary: Petro-Canada has signed a series of 30-year contracts with Libya's National Oil Corporation (NOC), bringing its old agreements into line with Libya's preferred EPSA-IV contract standard. The new deals stem from Libya's ongoing efforts to secure tougher terms from foreign oil companies, and mark the growing importance of Libya to Petro-Canada. End Summary. DONE DEAL - AT LAST 2. (SBU) On June 19, representatives from Petro-Canada and the NOC signed a total of six contracts covering all of Petro-Canada's acreage in Libya. The contracts were crafted under the NOC's EPSA IV agreement template, which has become the preferred framework for all international oil companies (IOCs) working in Libya (reftel). An agreement signed by the NOC and Petro-Canada in December 2007 was recently ratified by the General People's Congress, paving the way to sign the actual contracts. 3. (SBU) Under the new deals, Petro-Canada has committed to pay a $1 billion signing bonus and invest $3.5 billion in the redevelopment of several large producing fields, and $460 million in oil and gas exploration. Petro-Canada will pay 50% of all development costs and 100% of all exploration costs. The company had to accept a lower production share (a flat 12% for all six contracts, regardless of location), but hopes to double its current production levels to at least 200,000 barrels of oil per day over the next five to seven years. LIBYA OF GROWING IMPORTANCE TO PETRO-CANADA 4. (SBU) As the latest company to renegotiate its presence in Libya, thereby extending its presence to 2038 (its existing deals were set to expire in 2015), Petro-Canada has now opened up new opportunities in both exploration and redevelopment projects, with a predominant focus in the prolific Sirte basin region. According to local contacts with the company, the renegotiation of the contracts is consistent with Petro-Canada's efforts to re-position itself globally. Petro-Canada had not previously regarded Libya as an area central to its operations, given the company's exposure stemming from its Alberta operations and gas production in Syria. This new deal elevates Libya to a priority area of operations for the company, with prospects for substantial growth. 5. (SBU) Comment: Petro-Canada's re-negotiation is the latest in an emerging trend of contract extensions/renegotiations (reftel). The NOC is waging a concerted campaign to re-negotiate or extend existing contracts under better terms, principally with respect to production share. For their part, international oil companies - mindful of the high price of oil and limited venues for new exploration and production - have so far swallowed hard and signed up. End comment. STEVENS