Банкеръ Weekly



The twenty-five-year term of concession rights given to Bulgaria over Libyan oil expired on March 15. The country missed the chance not only to renegotiate the clauses of the 1979 ESPA-80 intergovernmental agreement, but also to make up for at least part of the USD200MN invested in geological inquiries. I haven't been informed about the expiry of the concession term, even though we have regular correspondence with the Libyan side, the Economy Minister Milko Kovachev said on March 15. He only added that a commission was about to be established for bilateral economic collaboration with Libya. This is what the minister settled during his meeting with Libya's Ambassador to Bulgaria held on March 11. Minister Kovachev underlined that Bulgaria's rights over the development and exploitation of oil fields in Libya were among the topics that the commission would discuss.The press centre of the Ministry of Economy also informed that in early March Minister Kovachev sent letters to both the Libyan Oil Minister and the President of the National Oil Company. He insisted on meeting them, but has received no answer yet.The problem with the ill-fated oil concessions has remained unsolved for the past fifteen years. In September 2003, after Bulgaria's then deputy minister of economy Nikola Yankov visited Libya, a plan was prepared for solution of the problem, but nothing has been done so far.Two years ago, the concession issue sounded much more optimistic as Libya was ready not just to extend the validity of the Bulgarian-Libyan agreement but also to reconsider some of its clauses. Since then an alternative has also been discussed. Bulgaria would seek a strategic partner with whom to exploit the fields in Murzuk and Gadames, because additional USD300MN investments were needed for their development.Considering the document signed 25 years ago, the Libyan National Oil Company and the Libya-registered Bulgarian Oil Company were authorized to exploit the deposits with the Libyan side taking 85% of the profits and the Bulgarian one - 15 per cent. However, production never started because Bulgaria failed to fulfil one simple condition - to present a technical and economical report on the reserve amounts harmonized with the world oil business standards, although the examination of the fields ended in 1987. Moveover, there was another reason for the delay. The Libyans are not aware who is actually holding the rights on the oil concessions today - whether it's the state-owned Bulgargeomin or the already privatized Oil and Gas Research and Production. In 1981, the owners were the Geology Committee and the Libya-registered Bulgarian Oil Company. When the state department was closed, it was succeeded by Geocom EOOD which was liquidated in 1998 by the then minister of economy Alexander Bozhkov. The company's assets, the Bulgarian Oil Company included, were transferred to the Pleven-based Oil and Gas Research and Production Company. In 2002, before it was privatized, the oil company was taken out of its assets and merged with the capital of Bulgargeomin. However, the changes in the ownership were not registered as required by the Libyan legislation. In order for the legal and financial obstacles to be overcome, a new company - Bulgarian Oil Company EOOD, was registered in 2003 as a side in the 1980 concession agreement.

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