Major Oil Companies' Exposure to Libya

by: Analytical Chemist

With the passage of UN Resolution 1973, France, Britain, the United States, and several Arab countries may intervene militarily in Libya to prevent attacks on civilians. This may very well avoid a Libyan civil war, and could save innumerable lives.

The effect of the UN action on ongoing and future Libyan oil production is difficult to say at this point. In order to help investors, I have examined some of the largest publicly traded oil companies to determine their exposure to Libya. I did this largely because when I tried to look up this information I couldn’t find the information compiled in one place. Simply understanding who conducts business in Libya – and how much – will I hope be useful to investors. Table 1 shows 9 of the largest oil companies and what percentage of their oil production occurs in Libya. I have also examined the what companies produce the most oil in Libya, and calculated what percentage of their annual oil production this represents. This information is summarized in Table 2. In all cases I used current production in Libya expressed as a percentage of total 2010 oil production. This information should help investors determine the extent to which their investments may be affected by events in Libya.

Figure 1

Several of the largest oil companies above have significant investments and exploration underway in Libya, but have no current production. Many had production facilities in the 1980s, but exited the country when the United States imposed sanctions on Libya in 1986. Following Kaddafi’s agreement to give up his weapons of mass destruction in December 2003, sanctions were eased and by 2004 ExxonMobil (NYSE:XOM) had restarted exploration in Libya and was subsequently awarded offshore drilling contracts in 2005, 2007, and 2008. BP (NYSE:BP) signed an onshore exploration deal with Libya in 2007 for $900 million, and this deal apparently represents BP’s single largest commitment. However, a BP spokesperson has said that they "are years away from any production." PetroChina (NYSE:PTR) has some exploration offshore of India that has required evacuating a portion of its personnel in Libya, but no current production. Petrobras (NYSE:PBR) also operates an exploratory unit offshore, and has pulled out a small number of staff.

Large Producers of Libyan Oil

The oil companies with the largest percentage of oil production in Libya are ENI (NYSE:E) at 12% of production, Marathon Oil (NYSE:MRO) at 12% of production, OMV Group (WBAG: OMV) at 10% of production, Gazprom (OTCPK:OGZPY) at 7.4% of production. The large U.S. companies with significant Libya exposure are Hess (NYSE:HES) at about 5% of production, and Conoco-Phillips (NYSE:COP) at 3.3% of production. I couldn’t find any other publicly traded companies with more than 3% exposure, although Total (NYSE:TOT), Occidental (NYSE:OXY), and Statoil (NYSE:STO) all have some production in Libya.

However the current situation is sorted out in the near term, uncertainty is likely to be the hallmark of oil politics in Libya going forward. Even if the opposition prevails — and that is still unknowable — it is unclear who will eventually come to power and what policies the future leadership will pursue. While any future government will need the hard currency that Libya’s oil reserves represent, the path to full production remains murky. Prudence would suggest that oil companies with exposure to Libya need careful attention.

These figures are compiled from a variety of sources. While some were from the annual reports of the companies involved, others were from secondary sources and I cannot completely vouch for their accuracy. I did try to use only the most reputable sources, but any investors intending to act on any of this information should conduct their own due diligence.

Disclosure: I am long XOM.