The dismissed head of the National Oil Corporation, Mustafa Sanalla, criticized the decision of the current head of the corporation, Farhat bin Qadara, No. 887 of August 18, 2022, regarding the formation of a committee to negotiate with the Indonesian company “Medco” for plot No. 47 in the Ghadames Basin.
The contract concluded between the Oil Corporation and the Indonesian company has witnessed disagreements over the past years, after Medco stopped all its exploration activity since 2014 until now, and all Libyan workers in the field and the Tripoli office without completing its contractual obligations, according to a post by Mustafa Sanalla on his Facebook page.
Sanalla blamed Ali Bin Qadara as saying in Resolution No. 887 that the move aims to “save the Plot 47 project,” considering that its board of directors, which he described as “legitimate,” is “the one who saved the development project from the attempt of the second party’s hegemony and arbitrarily disrupting all programs.” Action,” by taking the “courageous and decisive decision” to develop unilaterally at the expense of the National Oil Corporation, after giving all available opportunities to Medco, which has always been intransigent and insisted on illegal demands.
San Allah: A legal flaw
Another criticism that Sanalla mentioned is that Bin Qadara’s decision is a “legal lapse”, represented in forming a committee and assigning one of the board members of the institution (Ahmed Abdullah Ammar) as its chairman, and at the same time he is a member of the board of directors of the Libyan Investment Authority, which he considered making. God «legal flaw in the assignment of conflict of interests».
Sanalla said that the decision to form the committee contradicts the decision of the Board of Directors combined No. 97 of 2019 issued on November 17, 2019, which entrusted it to consider disputes in coordination with the Department of State Affairs.
– An agreement between the Oil Corporation and its partners to continue the implementation of the Contract Area 47 agreement in the Ghadames Basin
– Sanalla discusses aspects of cooperation between the National Oil Corporation and the Indonesian “Medco” company
Extension of the exploration agreement between the Libyan Investment Authority and Medco Energy.
Contract details
Sanalla listed the background of the agreement for Block 47, as the exploration and production sharing agreement for Block 47 in the Ghadames Basin was signed in March 2005 between the National Oil Corporation as a first party with a share of 86.3%, and the second party consisting of the Canadian “Fernix” company with its 6.85% share, and the Indonesian “Medco” company with a share of 6.85 %, and the Canadian company was the operator on behalf of the second party before the National Oil Corporation.
In 2010, after the first piece of oil discovery was made, the Canadian company “Fernix” sold its share to the Libyan Investment Authority, and then the operating status was transferred to the Indonesian company “Medco” to be the development and operation representative of the second party before the National Oil Corporation.
Sanalla referred to the commercial adoption of the oil discovery provided by “MEDCO” at the end of the year 2011, where production prospects were up to 50,000 barrels of oil per day, about 90 million cubic feet of gas per day, and about 10,000 barrels per day of condensate.
The next step was the establishment of the joint operating company for the development and exploitation of the discovery in March 2013, and it was called the Nafusa Oil Operations Company, which prepared the full development plan for the field and the completion of engineering works to start implementation work in August 2015 with the full participation of the second party technically and financially.
Sanalla: “Medco” has breached the contract
In November 2015, after changing its former representative in the Owners Committee, Medco sent a letter to the National Oil Corporation that it would not allow the start of development work unless the share of the second party was raised to 25%, which the Corporation rejected for explicitly violating the agreement, which obligates the second party. The implementation of the development work in accordance with the commercial presented and approved by the National Oil Corporation, and that changing the share violates the principle of transparency, especially that it won this agreement in a bid with others in which the basic criterion was the lowest participation share.
Sanalla said that the position of “Medco” after the National Oil Corporation rejected its request was to obstruct all work programs and budgets provided by the operator (Nafousa Oil Operations Company), by arbitrary use of the consensus mechanism within the Owners Committee entrusted with approving the work programs and budget, consisting of four members, including two members. For the first party, including the president and a member of each component of the second party, pointing out that the Libyan Investment Authority was in solidarity with the “Medco” company despite repeated meetings with them, and urged them to give priority to Libya’s interest in accelerating development and reaching the first production.
He explained that the National Oil Corporation held several meetings with “Medco”, and in the presence of the Libyan Investment Corporation, to reach an agreement that accelerates the development work, but the Indonesian company has always breached its obligations in every agreement, and has not paid its share in the operator’s expenses since the year 2020 until now, noting that The Libyan Investment Authority “has always adopted the same position, and also did not pay its share during the same period,” noting that the breach of the payment of the share allows the first party to terminate the agreement after 90 days of non-payment, which the institution avoided doing; Taking into account the presence of the Libyan Investment Corporation as a partner, forcing the National Oil Corporation to cover this deficit for the operator.
Medco is suing the Oil Corporation
He added that the National Oil Corporation decided, in January 2022, after nearly six years of “futile negotiations with the “Medco” company and the Libyan Investment Authority”, to start development work at its expense and for its own benefit alone, and directives were issued to the “Nafusa” company for oil operations to start In concluding contracts for implementation of development work, which happened within only months, as it is expected to reach the first production of 10-20 thousand barrels of oil per day by the end of the year 2023.
And he added: “Although this procedure preserves the right of the second party to join the development within a year of the start of production, provided that the previous and new financial obligations are paid, the “Medco” company filed an urgent lawsuit in February 2022 before the French courts to stop the National Oil Corporation from developing. This attempt was unsuccessful, with the request being rejected by the court, after which “Medco” initiated arbitration proceedings against the National Oil Corporation in March 2022, in the shadow of complete silence from the Libyan Investment Corporation.
Sanalla warns against “waiver” of Libya’s rights
At the end of his post, Sanalla warned “not to make any concession to this partner, not to depend on the frustrated, and to continue the development work at the expense and interest of the National Oil Corporation,” noting that the project is very promising, given that the economic study confirmed that at a production rate of 10,000 barrels of oil. Daily only, all expenses will be recovered within a period of six months only in light of the current prices of crude oil and the quality of the North Hamada field crude in plot 47, noting that the arbitration procedures will have their results in favor of the National Oil Corporation as usual.
Tags: Sanalla criticizes Ben Guedaras decision renegotiate Medco Plot Ghadames Basin
