By Benoît Faucon
LONDON--Libyan National Oil Co. officials have launched a charm
offensive to reassure foreign companies that are increasingly
nervous over the use of oil payments and security arrangements in
the war-torn country.
The state-run oil company has been caught in the middle of a
conflict playing out since the ouster and death of dictator Moammar
Gadhafi, dividing the country between an internationally recognized
government in the city of Bayda and an Islamist militia, Libya
Dawn, that controls the country's capital of Tripoli. The industry
has also been rattled by attacks by the radical Islamic State,
worker strikes and sabotage of oil facilities.
Amid the mounting chaos, National Oil Co. and Libyan Central
Bank officials have met with international energy companies to
assure them that their oil payments are being managed transparently
and independently, the company's chairman, Mustafa Sanallah, said
in an interview with The Wall Street Journal on Monday.
Mr. Sanallah said he has hosted two gatherings in Malta since
March involving officials from joint ventures with Marathon Oil
Corp., ConocoPhillips and Hess Corp. of the U.S., Eni SpA of Italy
and France's Total SA. He said he told them that the National Oil
Co. was free of political interference in Tripoli and that its
revenues moved transparently through the nation's banking
system.
"We operate independently," said Mr. Sanallah, adding he still
oversees oil-export contracts and official selling prices.
An Eni official confirmed its representatives attended a meeting
in Malta and discussed security issues. Total, Hess, Marathon and
ConocoPhillips declined to comment on the meeting.
Mr. Sanallah is also in London this week for an oil conference
and meetings with foreign companies to discuss security
arrangements in Libya.
While the National Oil Co. is one of Libya's biggest employers,
most of its projects are joint ventures with western firms. The
intensifying public diplomacy comes amid oil-company concerns that
Libya's political chaos may be deepening.
United Nations-sponsored talks around forming a unity government
have been unsuccessful so far.
Mr. Sanallah's efforts come as the Bayda government, which sees
the National Oil Co. as a tool of Libya Dawn in Tripoli, is trying
to create its own energy firm with the same name. The company
hasn't been successful yet in selling any oil, and Mr. Sanallah
said he still controls the nation's oil assets in the areas
controlled by the Bayda government.
Last month, Total was forced to write down $659 million on the
value of its assets in Libya in the first quarter while Austria's
OMV AG said Monday it didn't expect production in the country to
resume this year.
"Many companies consider [Libya] a loss for the time being,"
said Geoff Porter, head of North Africa Risk Consulting, which has
advised oil companies operating in Libya. "They are just waiting
for the situation to improve but they know it will take some
time."
Other companies have been worried about the diversion of
oil-revenue-which make up about 95% of its exports revenue--to
finance the conflict.
"The U.S. companies were worried the oil payments could be used
to fund militia," said one person who attended the meeting with Mr.
Sanallah.
In the Malta meeting, Mr. Sanallah said he and Libya's central
bank chief al-Sadiq al-Kabir explained oil payments were still
being managed transparently and were used to pay public officials
and services. The companies were told "there are no delays to
payments" for crude exports or fuel imports, Mr. Sanallah said.
Mr. Sanallah said he had discussed beefing up security
arrangements, as attacks from Islamic State, militias and unknown
attackers had helped drive production down to about 436,000 barrels
a day, down from highs of more than 900,000 barrels a day last
year.
Mr. Sanallah said he and the oil companies discussed
private-security contractors, closed-circuit television systems and
intrusion-detection radars successfully used in other
countries.
Mr. Sanallah said he had created a new position of general
manager combining security and sustainability, seeing economic
development as important to the sustainable resumption of oil
production.
"It's not a political issue. We need to create jobs for locals,"
Mr. Sanallah said, adding that he believed the country's many
tribes had been neglected under the Gadhafi regime.
Libya's oil output will be about 400,000 barrels of oil
equivalent a day, Mr. Sanallah told a Platts conference on Tuesday
in London, but he said production could increase by 200,000 barrels
a day within two months once technical issues are resolved.
Mr. Sanallah's efforts come as the Bayda government, which sees
the National Oil Co. as a tool of Libya Dawn in Tripoli, is trying
to create its own energy firm with the same name. The company
hasn't been successful yet in selling any oil, and Mr. Sanallah
said he still controls the nation's oil assets in the areas
controlled by the Bayda government.
Eric Sylvers contributed to this article.
Write to Benoît Faucon at benoit.faucon@wsj.com
Access Investor Kit for Total SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000120271
Access Investor Kit for Eni SpA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=IT0003132476
Access Investor Kit for Eni SpA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US26874R1086
Access Investor Kit for Hess Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US42809H1077
Access Investor Kit for Marathon Oil Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5658491064
Access Investor Kit for Total SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US89151E1091
Subscribe to WSJ: http://online.wsj.com?mod=djnwires