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The Guardian/UK

The Race Is on for Libya's Oil, With Britain and France Both Staking a Claim

Rebel leaders dismiss suggestions that firm promises have been made, but supportive countries look set to benefit

Julian Borger and Terry Macalister

A rebel fighter throws a stone into a pool of oil allegedly left by Moammar Kadhafi's troops near the town of Brega, Libya, Monday, Aug. 15, 2011. (AP Photo/Alexandre Meneghini)

The starting pistol has been fired on bids by Britain and other western powers to secure a slice of the oil prize in Libya when France said it was "fair and logical" for its companies to benefit.

Alain Juppé, the French foreign minister, planted his flag in the sand as the Guardian was told that BP was already holding private talks with members of Libya's interim government.

Libya is a vital energy producer, and BP had previously committed itself to spending more than $1bn on exploration plans under Muammar Gaddafi's government.

Shell was also becoming active before the civil war broke out, as was Total of France, but the conflict over the past few months has brought the country's existing oil production of 1.6m barrels a day – 2% of the world's total – to a halt.

Rebel leaders had already made clear that countries active in supporting their insurrection – notably Britain and France – should expect to be treated favourably once the dust of war had settled.

But they were anxious to shut down any suggestion that firm promises had already been made to carve up the country's only real wealth-providing industry with foreign powers or companies.

The new Tripoli government has denied the existence of a reported secret deal by which French companies would control more than a third of Libya's oil production in return for Paris's support for the revolution.

The French foreign minister said he was also unaware of the letter referring to the reported deal, which was dated 3 April and published on Thursday in the French daily newspaper Libération. It purported to show an undertaking by the National Transitional Council (NTC) to reserve "35% of total crude oil in exchange for the total and permanent support for our council".

The document was addressed to the Qatari government, which Libération described as acting as an intermediary between Libya and France, and says the NTC authorised "brother Mahmoud" to sign the deal with France – a reference to Mahmoud Shammam, the interim government's information minister, according to Libération.

Shammam on Thursday rejected the letter as a forgery. "It's a joke. It's false," he said, according to Reuters, while Juppé said he was unaware of the letter.

But the French foreign minister told RTL radio: "What I know is the NTC said very officially that concerning the reconstruction of Libya it would turn in preference to those who helped it. That seems fair and logical to me."


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Samuel Cuzlik, a Middle East energy analyst with the consultancy IHS Global Insight, also questioned whether the letter may have been a forgery prepared by the Gaddafi regime to discredit the rebels by suggesting they were prepared to hand over the country's riches to foreign companies.

He pointed out that it would be highly disruptive – if not impractical – to earmark a particular part of oil production for one country as that would involve breaking contracts signed in the past with other firms.

"The new government clearly wants to get the oil industry back up and running as quickly as possible, and they know that can be best done with the help of the foreign companies that previously operated them," Cuzlik said.

"Anything that led to further delays in production – and financial income – would not be welcome."

France's Total was the operator of al-Jurf field in the Mediterranean which has been untouched by war, while ENI of Italy had the most dominant position, producing 273,000 barrels of oil a day.

ENI is also the operator of the 190-mile (310km) pipeline that can carry 11bn cubic metres of gas annually from the Libyan coast to Sicily. This has been inactive for more than six months.

BP has no producing assets, but was just about to drill its first exploratory well before the civil war broke out, while Shell has been employed to try to upgrade an ageing liquefied natural gas terminal.

BP declined to comment on any discussions with Libya's interim government, but respected industry sources confirmed the two sides are in contact over future oil production.

Chinese and Russian companies also had a significant presence in the country but could face difficulties after being equivocal early on about the rebel plan to unseat Gaddafi.

Abdeljalil Mayouf, an executive at Libyan rebel oil firm Agoco told Reuters: "We don't have a problem with western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil."

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