As Libyan rebels solidify their hold on Tripoli, the National Transitional Council (NTC) must transition from a wartime coalition into a viable government. The NTC has stated their desire to focus on the Libyan economy as soon as possible, and the largest component of the Libyan economy is oil production.
In response to the headline topping events of August 21, I am updating my previous article on this topic, examining Libyan oil production and companies that have conducted or are planning to conduct business in Libya.
Last year Libya accounted for less than 2% of worldwide oil production. Oil prices have already begun to fall as a result of the rebels success in Tripoli. However, there are two types of companies for which Libya is strategically important beyond simple supply and demand issues. First, there are companies that already have significant oil and gas production capabilities in Libya. Second, there are companies that have little or no current production, but significant plans for exploration and development.
Companies in the first category with the greatest 2010 production in Libya include Eni (E), Marathon Oil (MRO), OMV Group (OTCPK:OMVKY), and Gazprom (OTCPK:OGZPY). Eni is the largest company by capitalization in Italy, and Libyan sources represented 12% of 2010 production. Italy and Libya traditionally have very close ties, and Eni is likely to be involved in any discussions with the NTC involving oil and gas development. Marathon Oil also had 12% of 2010 production based in Libya, while OMV Group had 10%, and Gazprom 7.4%. Repsol (OTCQX:REPYY), based in Spain, had 3.8% of its 2010 production in Libya. Total (TOT), the French oil multinational, had 2.6% of its 2010 production based in Libya. Some large American companies with significant exposure to Libya include Hess (HES), which had 5% of 2010 production in Libya, Conoco-Philips (COP), which had 3.3% of 2010 production in Libya, and Occidental Petroleum (OXY), which had 2.0% of its total 2010 production in Libya. Each of these companies has seen interruptions in oil production as a result of the civil war in Libya, and the NTC will make resuming oil production a priority as soon as possible.
The second category, companies with little or no current production but significant investment in exploration and development, has seen little direct impact to date, but has seen significant delays in exploration and drilling schedules. This has and will continue to delay these new projects, but will likely receive attention soon after the conflict ends because of the importance both to the companies and to the Libyan economy. ExxonMobil (XOM) restarted exploration in Libya in 2004, and was awarded various offshore drilling contracts in 2005, 2007, and 2008. BP (BP) signed an onshore exploration deal worth $900 million in 2007, and though BP is "years away from any production," it represents their single largest exploration commitment. Petrobras (PBR) also operates a small exploratory unit offshore of Libya that required evacuation in the early days of fighting. Obviously, resumption of exploration will not immediately impact the revenues of ExxonMobil, BP, or Petrobras. However, resolution of the current conflict will allow these projects to restart and may meaningfully impact revenues for these companies in future years.
Although companies in both the first and second categories above may benefit from a peaceful state in Libya, significant issues must first be addressed. And even when a stable, peaceful government is established, it may take significant time to bring anything other than existing pipelines, wells, and refineries back online. Investors should conduct their own due diligence, but I hope this provides a useful starting point for research on oil companies in Libya.
Disclosure: I am long XOM.