British oil giants BP and Shell last week signed a range of agreements with Libya’s National Oil Company (NOC) aimed at boosting the country’s oil and gas output recovery. Very few people outside the oil and gas industry appreciate the much broader and deeper strategic significance that often lies behind the announcement of new exploration and development deals or how that significance can be manifested on the ground.
At the core of this is the international legal position surrounding such developments, which at its most basic level means that companies engaging in these can do whatever they want to protect these investments, provided they have the blessing of the indigenous government. These protective measures can include stationing as many personnel as the company wants on the site – including not just those directly attached to the exploration and drilling but also, crucially, security personnel – all of which can come from the same country as the company developing the site. Additionally, international law allows for these companies to build out extensive infrastructure developments to support the main operations on the sites, again provided these have the approval of the indigenous government. In many ways, these vast oil and gas exploration and development projects can be viewed as a projection of the power of the country from which these foreign firms come and enjoying much of the protected status as embassies do. The template for this nexus of business and geopolitical ambition was the British East India Company which did precisely the same thing from 1600 to its dissolution in 1874. It was founded to open new trade routes, which it then secured with vast numbers of its own security personnel. Indeed, at its height, the company had enormous economic and political influence over much of the Indian subcontinent, Southeast Asia, and East Asia, and ran an in-house security force of around 260,000 men.
A little-known staunch admirer of the East India Company’s strategic vision and implementational tactics is China’s President Xi Jinping, according to several security sources exclusively spoken to over the years by OilPrice.com. “The wide-ranging long-running cooperation deals he has arranged in Iran and Iraq mirror the sort of agreements the East India Company used to make and his implementation of these on the ground also reflect its operations,” said one of the sources again last week. Indeed, the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and analysed in full in my latest book on the new global oil market order included not just first refusal for Chinese firms on new oil and gas field agreements, but also the stationing of vast numbers of Chinese security personnel to guard the developments. It additionally featured the right to build out communication and transport links (including ‘dual use’ – civilian and military – airports and seaports, and railway networks) across the country. In Iraq’s case, China covered the same bases in the foundation stone ‘Oil for Reconstruction and Investment’ agreement signed by Baghdad and Beijing in September 2019, which allowed Chinese firms to invest in infrastructure projects in Iraq in exchange for oil. This later became broadened and deepened in the all-encompassing ‘Iraq-China Framework Agreement’ of 2021. China has replicated the same type of deals – which also follow the East India Company template – to build its power base in key hubs along its multi-generational power-grab project ‘The Belt and Road Initiative’, as also detailed in full in my latest book.
Both BP and Shell have been at the vanguard of Great Britain’s push to secure new oil and gas supplies to substitute for those lost due to sanctions on Russia after it invaded Ukraine on 24 February 2022. This, in turn, has formed part of a Western alliance of firms that seek to minimise such Russian supplies in order to deny it financing to continue its war in Ukraine and then to further enhance its military capabilities for further attacks on NATO’s eastern flanks in the next five years, as NATO Secretary General Mark Rutte warned of again recently. A key focus of these Allied efforts in recent times has been Egypt, which was one of the very few Middle East oil and gas players – with multiple broader strategic advantages attached – that China and Russia had not sewn up through various short- and long-term deals in the run-up to the 2022 Ukraine invasion, as also analysed thoroughly in my latest book. The U.S.’s Chevron was a major early leader in establishing a solid presence in Egypt after 2022, and recently it and Shell
were awarded the country’s North Samian offshore block and Northwest Atoll offshore block. Shell also recently announced plans to begin the development of the tenth phase of Egypt’s Nile Delta offshore West Delta Deep Marine (WDDM) concession in the Mediterranean Sea. In the meantime, BP has said that it will invest US$3.5 billion in the exploration and development of Egypt’s gas fields in the coming three years, with the amount subject to a doubling in size if the exploration activity yields new discoveries. Italy’s Eni also operates Blocks 2, 3, 8, and 9 in Egypt and has active interests in Blocks 7 and 11 operated by TotalEnergies. For its part, the French supermajor’s CEO, Patrick Pouyanné, recently discussed with Badawi the firm’s progress on the Cronos field and strategies to link its production to Egypt’s facilities. This sort of on-the-ground expansion of Western oil and gas – and geopolitical interests – is also set to take place in Syria following the U.S.-U.K.-led removal of longstanding President Bashar al-Assad last December, according to one of the security sources spoken to by OilPrice.com in the last two weeks.
Western firms had also managed to hold their ground in Libya, despite the chaos that ensued after its heavily sponsored removal of Muammar Gaddafi as leader in 2011. Before this, the country had easily been able to produce around 1.65 million bpd of predominantly high-quality light, sweet crude oil. Additionally, positive back then was that production had been on a rising trend, up from about 1.4 million bpd in 2000. Further increases were on the horizon to push output close to the circa-3 million bpd achieved in the late 1960s, with the National Oil Corporation (NOC) planning to roll out enhanced oil recovery techniques at maturing oil fields to that effect. At the beginning of this year, oil minister Khalifa Abdulsadek stated that the country still required US$3-4 billion to reach the 2026/27 1.6 million bpd production target. Towards this end, early March saw Libya announce plans to launch its first oil exploration bidding round in over 17 years, with 22 areas up for grabs across the country, which still has 48 billion barrels of proved crude oil reserves in place — the largest in Africa. These include major sites in the Sirte, Murzuq, and Ghadamis basins as well as in the offshore Mediterranean region. According to an update from the Oil Ministry in the middle of last month, the bidding had already attracted more than 40 applicants, including U.S. supermajor ConocoPhillips, which voiced its interest in expanding its operations in Libya beyond its current running of the Waha concession. From Europe, interest may well include Italy’s Eni, Spain’s Repsol, and Austria’s OMV. Each of these firms was quick to resume exploration activities in Libya following blockades last August that halted around 700,000 bpd of oil production, despite a 10-year hiatus in their activities beforehand.
The same is true of BP, which said on 8 July that it had signed a memorandum of understanding to evaluate options for redeveloping the giant Sarir and Messla onshore fields in the Sirte basin, and to assess potential unconventional oil and gas development. The firm’s executive vice president for gas and low carbon, William Lin, stated that the agreement, “reflects our strong interest in deepening our partnership with NOC and supporting the future of Libya’s energy sector.” Of wider interest here to oil market and geopolitical aficionados is that it is BP that also recently signed a similar deal to boost the recovery rates of five key fields in the semi-autonomous northern region of Kirkuk in Iraq, as analysed in full by OilPrice.com recently. In the meantime, Shell – which has been more focused in southern Iraq through its partnership with the Basra Gas Company – signed an agreement on 7 July, “to evaluate hydrocarbon prospects and conduct a comprehensive technical and economic feasibility study to develop the al-Atshan field and other fields fully owned by the NOC”.