BP (BP) Libyan Contract Still in Place Says Company

A spokesman for oil giant BP (NYSE:BP) said as far as the company knows, their contract with Libya's NOC remains in place.

He said, "At the moment we just have to wait and see. We're monitoring the situation. We have a contract with NOC and as far as we know it is still in place."

Shokri Ghanem, chairman of NOC, said last week the Libyan government would honor existing contracts with Western oil companies. He said, "We have our contracts with them. We will honor our commitments and I'm sure that they will honor their commitments."

After pressure from Western governments though, Gaddafi has said he'll replace those energy companies with those from China, India and Russia.

Even in a best case scenario, the production of the highly-desired light, sweet oils will take months to return to prior levels, suggesting gas prices could remain high for months, if not longer.

BP closed Thursday at $44.68, gaining $1.43, or 3.31 percent.

Brent Soars Above $110 as Libya Burns

Oil futures rallied above $110 a barrel on Wednesday, posting the biggest three-day percentage gain in a year, as the escalating violence in Libya could further reduce its production.

Between 300,000 and 400,000 barrels per day of Libyan output -- up to 25 percent -- has been shut down, according to Reuters calculations, marking the first cut in oil supplies related to the recent wave of anti-government unrest in North Africa and the Middle East.

After Libyan leader Muammar Gaddafi vowed in a defiant speech on Tuesday that he would not step down, promising severe punishment to his detractors, analysts fear that long-lasting supply disruptions or even permanent damage lies ahead for the OPEC member's oil industry.



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Libya Counting on BP (NYSE:BP) to Revive Oil Success

With major oil companies like Chevron (NYSE:CVX), Conoco Phillips (NYSE:COP) Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS-A), among others, unsuccessfully working the offshore areas of Libya, the country is counting on a successful exploration from BP to help them return to an important player in the oil sector.

The Gulf of Sidra, which BP will be drilling in, hasn't been drilled before, and BP will be drilling the first in the area in hopes of tapping into Libyan oil and gas reserves.

Libya has a goal of reaching levels from the 1970s, where they peaked a 3 million barrels of oil a day being produced by 2015. By 2020 they want to increase daily production to 3.5 million barrels, although some close to the situation say the possibility of those goals being met is slim.

National Oil Corp., the Libyan state state energy company, said more realistic would be attaining about 2.5 million barrels a day by 2015.

In a deal with Libyan leader Muammar Gaddafi, BP will drill five deepwater offshore wells in the Gulf of Sidra, along with an onshore concession in Ghademe Basin.

The bad news for BP and Libya is Royal Dutch Shell has already drilled two wells in the Gulf of Sidra and came up empty.