UK supermajor BP plc (NYSE:BP) has abandoned its plan to explore Libya’s Ghadames basin largely due to the looming security concerns. The growing instability in the Middle East countries has forced several oil majors to alter their exploration program in the region.
At the time when BP inked an agreement with Libya in 2007, the deal was considered to touch a new milestone. BP’s exploration and production sharing agreement with Libya spans onshore acreage in Ghadames, near the border of Libya, Algeria and Tunisia as well as offshore acreage in the central Sirte basin.
However, increasing turmoil and tough contract terms have impelled oil firms to reconsider their Libya plans. Some companies have rescheduled or even shelved their Libyan assignments altogether.
Since Gaddafi was ousted in 2011, uncertainty in Libya has been on the rise. Attacks on foreigners have become more common with a mix of dissatisfied workers, separatists and militia. This has hindered much of the country’s oil exports for months.
A security review in Jun 2013 relating to the onshore exploration drilling program revealed that BP could not deliver the project safely and securely on time. BP is evaluating alternative approaches and is progressing with offshore plans, which carry low safety risks.
The British company is working out the preparation required for offshore exploration drilling. As per BP’s annual report, its assets in Libya were worth $472 million at the end of 2013. It is still in the exploratory stage and has not produced oil in the region.
There are other oil majors which have been affected by the Libya unrest. Companies such as the U.S. supermajor ExxonMobil Corp. (XOM) also cut its staff and operations in Libya in Sep 2013, while Anglo-Dutch supermajor Royal Dutch Shell plc (RDS.A) withdrew exploration on two blocks in 2012 owing to poor results. Marathon Oil Corp. (MRO) also tried farming out from one of Libya’s top oil ventures, but the deal was blocked by the country.
BP carries a Zacks Rank #3 (Hold).