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C O N F I D E N T I A L SECTION 01 OF 03 TRIPOLI 000765

NOFORN SIPDIS

STATE FOR NEA/MAG AND E; STATE PLEASE PASS USTR; ENERGY FOR GINA ERICKSON; COMMERCE FOR NATE MASON 

E.O. 12958: DECL: 9/27/2019

TAGS: ECON EPET EMIN PGOV LY ENRG

SUBJECT: NATIONAL OIL CORPORATION BUSINESS CONTINUES AMID CHAIRMAN'S RESIGNATION REF: A) Tripoli 72; B) 08 Tripoli 564 TRIPOLI 00000765 001.2 OF 003

CLASSIFIED BY: Gene A. Cretz, Ambassador, U.S. Embassy Tripoli, Department of State. REASON: 1.4 (b), (d)

1.(C) Summary: Acting Chairman of Libya's National Oil Corporation, Ali Sugheir, insisted that in spite of the resignation of former Chairman Shukri Ghanem, business operations would continue as usual. Sugheir did not know when a new chairman would be appointed but did not expect operations to change at all in the interim, as Sugheir personally had been directing the company's operations as General Director for the last three years. To that end, Sugheir outlined plans to create a new joint venture with ENI to export eight billion cubic meters (bcm) of gas per year, to expand the Greenstream pipeline capacity, and to develop a new Liquefied Natural Gas facility capable of producing five bcms per year. Sugheir also confirmed GOL plans to establish a new General People's Committee (Ministry-equivalent) for Energy, which will take charge of Libya's oil, gas, electricity, nuclear and solar energy, and environmental sectors. End Summary.

AFTER SEVERAL ATTEMPTS, NOC CHIEF SUCCESSFULLY RESIGNS

2.(C) During a September 15 meeting with P/E Chief, the Acting Chairman and General Director of Libya's National Oil Corporation (NOC), Ali Sugheir, confirmed that Shukri Ghanem had resigned from his position as Chairman of the NOC - a position Ghanem had held since 2005. Sugheir said he was not at liberty to discuss the reason for Ghanem's resignation, the timing of which was considered unusual by several General Manager's of International Oil Companies (IOC) represented in Tripoli. However, Sugheir insisted that the NOC would continue operating as usual. He said that as General Director of the NOC, he was already in charge of daily operations - even under Ghanem - and that the company's direction would not change simply because the chairman had departed. He explained that his colleague, Azzam Ali al-Mesallati, would also continue in his role as head of investment and joint ventures. [Note: Many observers believe al-Mesallati will be named NOC Chairman in Ghanem's place. End Note.] "We are moving forward with business as usual," Sugheir stated, "you will see no difference in our operations from the outside."

3.(C) Numerous explanations surround Shukri Ghanem's August 25 resignation. An August 27 article published by independent foreign-based website "Libya al Youm" reported that Ghanem resigned in protest of policies generated by Prime Minister al-Baghdadi al-Mahmoudi. xxxxxxxxxxxx

BUSINESS AS USUAL - DEVELOPING LIBYA'S GAS SECTOR

4.(C) As an example of moving forward with business as usual, Sugheir discussed his work to develop Libya's gas sector, sharing his long-term vision of transforming Libya into a hub for gas exports, to Europe and across the region. To that end, the NOC is developing a gas network from East Benghazi (650 miles east of Tripoli) to Mellitah (60 miles west of Tripoli) that will eventually transport more than 400 million cubic meters of gas. Additionally the Sirte Oil Company (state-run) is extracting gas from the Marsa al Brega field (from which the Esso company pulled out in 1983) for transport to Benghazi, 480 miles eastward, and further eastward along the coast to the city of al-Khums.

5.(C) In the west, Sugheir explained that the Mellitah Oil and Gas B.V. company, a joint venture between the NOC and the Italian company ENI, is extracting gas from Al Wafah field (60 miles west of Tripoli) and transporting it via its Greenstream pipeline to Mellitah for export and domestic consumption. [Note: The Greenstream pipeline came on-stream in September 2004. End Note.] The joint-venture exports 8 billion cubic meters (bcm) per year across the Mediterranean and supplies 2 bcms per year to the Libyan domestic market. To achieve an TRIPOLI 00000765 002.2 OF 003 additional transport capacity of 3 bcms per year, Mellitah Oil and Gas B.V. is expanding the Greenstream pipeline. The firm is also constructing a new Liquefied Natural Gas (LNG) facility at Mellitah designed to produce 5 bcms per year of LNG to be marketed worldwide. [Note: Mellitah Oil and Gas B.V. also produces 420,000 barrels of oil per day, and ENI is entitled to 12% of produced oil and 40% of natural gas extracted. End note.]

6.(C) According to Sugheir, the NOC is also currently working on a project to provide gas to all electric, cement, and steel factories throughout Libya via pipelines that are being developed by the Sirte Oil Company. He said that the NOC had adopted a European model for its gas exploration activities, which he described as a "no-waste" policy. Sugheir estimated that over 25 million cubic meters of gas had been flared (i.e., wasted) over the last twenty years - his new policy was designed to ensure that gas flaring activities were minimized. He said that the NOC was working in coordination with other government bodies to develop an overall strategic gas policy, which would include plans for further development of the sector, as well as gas pricing strategies.

LIBYA STILL INVESTING IN NEW OIL EXPLORATION ACTIVITIES

7.(C) To counter criticism that many companies had downsized or closed operations because most new oil exploration activities in Libyan fields had not produced, Sugheir blamed the global economic crisis, claiming that many of the new fields were still in the early stages of development and would not be ready for production for three or four more years. He cited a recent discovery by the Waha Group (a joint-venture that includes U.S. companies Marathon, Amerada-Hess, and Conoco-Phillips) in the Jalo field in the Sirte Basin (400 miles south of Benghazi) as evidence that new exploration activities were worthwhile. [Note: The discovery at Jalo field, which lies on the southern end of the Sirte Basin, was unsurprising given the area's proven reserves. End note.] Sugheir also described a "huge" NOC project to develop an international oil pipeline that would connect the cities of al-Khums, Tripoli, and Mellitah and would eventually be a source for increased exports to Europe. He said that five major sedimentary basins with oil and gas resources had been discovered in Libya and that seismic data suggested that much more remained to be discovered across the country. Most areas in Libya, he stated, were still underexplored. Sugheir insisted that the GOL's goal of producing 3 million barrels of oil per day by 2012 was still feasible.

NEW MINISTRY OF ENERGY TO BE CREATED

8.(C) In other energy-related news, Sugheir confirmed that the GOL was in the process of establishing a new General People's Committee (Ministry-equivalent) for Energy, which will direct Libya's oil, gas, electricity, nuclear and solar energy, and environmental sectors. The new ministry will also promote joint ventures between the GOL and private local and foreign companies in the aforementioned sectors. Sugheir claimed that the idea of a Ministry of Energy was not new, and in fact, the ministry would represent the reincarnation of a previous energy structure that had existed in the past. [Note: An informal energy council already exists, comprised of the Ministers for Transport, Manpower, and Economy, NOC representatives, and members of Libya's National Security Council. End note.]

9.(C/NF) Bio note: Ali Mohamad Salah Al Sugheir has served as Vice-Chairman and General Director of Libya's National Oil Corporation since 2006. Prior to this, he served as chairman of the Sirte Oil Company, the most important of the NOC's subsidiaries, a position to which he was appointed after a short stint as exploration manager. A graduate of Glasgow University, Sugheir speaks Arabic and fluent English. During the meeting with P/E Chief, he was charismatic, confident, and engaging, and he seemed personally proud of the NOC's initiatives to expand its gas exploration activities. While he accepted a meeting easily by phone with P/E Chief, he emphasized that a meeting with the Ambassador must be requested officially through MFA Protocol. Although the meeting took place during Ramadan - the Islamic holy month during which Muslims are called to fast - Sugheir asked if he could open and begin eating a box of candy that P/E Chief delivered in honor of Eid. He refrained when a TRIPOLI 00000765 003.2 OF 003 colleague quietly mentioned Ramadan.

10.(C) Comment: Ghanem's resignation was not unexpected; xxxxxxxxxxxx. More recently, Ghanem had been tasked with collecting funds to pay for the lavish celebrations marking the 40th anniversary of Qadhafi's coup. (A manager at Total claims that the NOC has ordered a 100-thousand barrel per day increase to recoup funds for the gala event.) As March and September (General People's Congresses and Revolution Day, respectively) are customary windows for high-level personnel changes, the September 1 window may have been the chance Ghanem was looking for to get out xxxxxxxxxxxx. Regardless of the reason for the resignation, Ali Sugheir - who does not seem as encumbered as Ghanem by reformist ideals - does not intend to waste time wondering who will replace the chairman. Sugheir's plans to move forward with expanding Libya's gas sector are robust, and if successful, could provide the GOL with another large source of income to fill in the gaps for any losses in the oil sector. End Comment. CRETZ