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Libya hopes to renew US term oil sales

VIENNA - Libya, released from US sanctions, is pushing hard to revive long-term crude oil sales agreements with American refiners for the first time in more than two decades, a Libyan industry source said yesterday.

“We’re in serious talks and we hope for some long-term contracts by 2005,” the source told Reuters. Potential customers for the country’s state-owned National Oil Corp (NOC) are primarily major US refiners located on the east coast — Valero, Sunoco and ConocoPhillips — as well as ChevronTexaco, he added.

Talks with refiners for yearlong crude sales agreements usually begin in mid-October, giving the NOC plenty of time to hammer out new deals.

The United States was a major market for Libyan crude before the US imposed an imports ban in 1982. It had been taking more than 700,000 bpd in the late 1970s.

The source declined to say how much of Libya’s largely light crude could be contracted to the United States, but the Opec member will likely be keen to diversify its rising supplies away from Europe, which takes nearly all its exports.

Exports have risen from around 1.1 million barrels per day (bpd) to 1.3 million bpd this year as Opec members pumped at full throttle in an effort to cool record high prices. Only about 60,000 bpd is sold into Asia, the rest staying in Europe.

US refiners should be equally eager to get a hold of Libya’s easier-to-refine, low-density oil that is in such high demand. Heavier crudes are worth around $10 less than lighter ones, their biggest discount ever.

On a spot basis, the north African producer has been selling about one million barrels a month of crude to the US since Washington eased the trade embargo this April, allowing American companies to once again buy oil from Libya. US refiners ConocoPhillips and Valero have both bought cargoes, while global major Total, which has equity production in Libya, has taken at least one cargo transatlantic, the source said. Sharara, Es Sider and Brega have all made the trip.

Swiss-based trader Vitol was the first company to lift Libyan oil to the United States in early June, but the reluctance of many US refiners to experiment with an oil quality they had not run in more than two decades made the cargo difficult to sell, trade sources said. NOC will have to overcome the conservative nature of many refiners to sample new oils, but could be helped by the return of US companies to oil producing assets frozen in 1986.

Libyan officials said this week that the Oasis group, which includes Marathon Oil Corp , ConocoPhillips and Amerada Hess, could return to their oilfields next month. The Oasis fields produced 450,000 bpd in 2003, according to Opec data. All three companies have refining assets in the United States, giving them the option to take Libyan crude directly back there. ConocoPhillips has been using some Libyan crude in a German refinery it partly owns for many years, market sources say.