Oxy to expand projects in Libya

Occidental Petroleum Corp. said Monday that it would join with Austria’s OMV to expand development projects in Libya. But the two oil companies agreed to reduce their share of production from the North African venture in Libya to reflect record prices.

Westwood-based Occidental and Vienna-based OMV, which are jointly developing fields in the central region of Sirte, agreed to take a smaller share and increase production from the project, Libya’s state-run National Oil Corp. said on its website. Occidental is the fourth-largest oil company in the U.S., and OMV is the largest in central Europe.

The two companies received a revised contract for 30 years that calls for $5 billion in investments over five years to triple daily output from the Sirte Basin to more than 300,000 barrels of oil, according to separate statements from Occidental and OMV. The companies will contribute a combined 50% of the investment, and National Oil will provide the rest.

Occidental and OMV said they would receive 10% to 12% of gross production from the project, depending upon the field. Libyan leader Moammar Kadafi met Occidental Chairman Ray Irani on Sunday and briefed him on the agreement, Tripoli-based National Oil said.

“None of these companies disclose the exact terms of any contracts, but I assume that the terms are getting tougher and tougher,” said Fadel Gheit, an analyst at Oppenheimer & Co. in New York.

Occidental’s share of gross production is after taxes and compares with a higher percentage before taxes under the old agreement, spokesman Chris Stavros said.

“I wouldn’t describe it as a deterioration of terms,” Stavros said. “We’ll be able to produce more and book additional reserves. We have access to very prolific producing areas and fields under the new agreement, which includes our old fields and some new fields as well.”

Under previous contracts, foreign companies received as much as 49% of production from oil ventures in Libya.

Libya is negotiating contract renewals with seven companies to get better terms as oil prices soar, National Oil Chairman Shokri Ghanem said this month.

Occidental shares fell $2.83, or 3.9%, to $69.27. OMV declined less than 1% in Vienna.