The move appears to be an escalation of tactics to nationalise the company's assets in that country.
Libya to investigate Canadian oil firm
Libyan authorities are investigating allegations that a small Canadian oil company was improperly pre-qualified to bid for exploration rights in the North African country, tactics that seem aimed at nationalising the company's Libyan assets. The investigation could undermine the legal basis for Verenex Energy to operate in Libya just as the company had attracted a takeover offer from a Chinese state-owned oil company, and could potentially enable Tripoli to seize the company's assets cheaply. In a statement on its website, Verenex, which is the smallest foreign company with exploration rights in Libya, said it still had not received consent from Libya's National Oil Corporation (NOC) for the proposed C$499 million (Dh1.59 billion) takeover by China National Petroleum Corporation (CNPC), despite agreeing to pay a C$46.7m "approval bonus" to expedite clearance for the deal. It also disclosed the existence of the Libyan investigation, saying it considered the allegations were "without merit". "The allegations are being made more than four years after the award of exploration rights under a transparent bid process and coincident with a request for consent for the sale of the company," Verenex said. Over the past four years, Verenex has made a string of oil and gas discoveries in Libya, giving the company more than two billion barrels of oil reserves. The chairman of NOC, Shokri Ghanem, who is also Libya's de facto oil minister, has repeatedly said Libya would seek to match the Chinese offer for Verenex, as Libya's government seeks to retain a larger share of the country's oil wealth. His latest statement to that effect, about a month ago, was followed by two letters from NOC to Verenex informing the Canadian company of the investigation. Verenex said it continued to engage in discussions "in good faith" with NOC and the Libya's General People's Committee (GPC), a group of powerful elected officials headed by the country's president, Muammer Qadafi. However, "it is now clear that the GPC is seeking either a reduced purchase price or an increased approval bonus", it said. NOC's consent to a change of control of Verenex is required under the terms of the production sharing agreement between the two companies. The Canadian firm received the takeover offer from CNPC in February, and was hoping to finalise the deal before its annual meeting in August. But now "there can be no assurance that a sale transaction will be concluded on the terms contemplated, or at all", it said. "Verenex is considering and evaluating all of its options in light of these recent events, including legal remedies," the company added. The Canadian government has voiced concerns over the developments, and plans to press Tripoli for a response. According to Reuters, the Canadian foreign affairs minister has sent a letter to his Libyan counterpart and told Libyan officials that Canada expected the matter to be resolved in a manner fair to Verenex and its shareholders. The company's shares fell 23 per cent on the Toronto Stock Exchange on Monday, to C$6.60, after Verenex posted its statement. Verenex is not the only foreign oil firm to have suffered recent setbacks in Libya because of the government's drive towards tougher operating terms. In the past year, Libya has renegotiated contracts with Austria's OMV, ENI of Italy, the French company Total, Repsol of Spain, the Norwegian company StatoilHydro, and Petro-Canada, which was recently acquired by Canada's Suncor, each time obtaining a bigger share of revenue for NOC in exchange for contract extensions. Oilfield contractors have also been affected. In March, international engineering and construction firms called for talks with NOC over a plan to stop awarding work to firms that were based overseas, which was unveiled amid calls from the GPC to replace foreign contractors with local firms. However, Libya is still heavily dependent on foreign expertise to boost its oil and gas capacity, and its increasingly nationalistic policies may have contributed to a flattening of production growth in recent years. This year's significant drop in output, however, was due to compliance with OPEC cuts. With global oil demand in decline, Libya has recently scaled back its plans to boost capacity, targeting 2.3 million barrels per day (bpd) by 2012 instead of 3 million bpd. Last year, it pumped about 1.8 million bpd of crude. email@example.com