Occidental to Sell 25% of Oil Assets in Libya

Occidental Petroleum said Thursday that it has agreed to sell 25% of its Libyan oil producing assets to the state-owned Austrian oil company for an undisclosed amount of cash.

Oil industry analysts said the sale reflects a continuing effort on the part of the Los Angeles-based oil company to diversify the risk of holding foreign assets. Two weeks ago, Occidental sold half of its oil-rich Colombian holdings to Royal Dutch Shell for $1 billion in cash.

Andrew Gray III, an analyst with Pershing & Co. in New York, praised the sale. “They are diversifying and monetizing their crude. I think it’s excellent news.”

Wall Street’s reaction was favorable. Occidental’s stock closed at $33, up 37.5 cents, as 182,600 shares traded on the New York Stock Exchange.

Occidental has been trying to sell at least part of its Libyan holdings for some time. Last February, it was close to selling 50% of its Libyan assets to a consortium that included the Austrian-owned company Oesterreichische Mineraloelgesellschaft of Vienna, or OMV. Industry sources said that $250-million sale was blocked by Libyan leader Col. Moammar Kadafi.

8% of Austria’s Needs

“The Libyans didn’t want to deal with small companies whose technical abilities are not well known. The fact that the deal went through means that the Libyans have given in,” said Onnic Marashian, an editor at Platt’s Oilgram News.

Occidental said that, when the deal is completed June 30, OMV’s share of the production will be 13,000 barrels a day of crude oil, or about 8% of Austria’s current crude oil needs, according to Austrian government figures. Austria currently imports about 90% of its crude oil, 25% to 30% of which comes from Iraq.

OMV would also get 2,000 barrels a day of natural gas liquids at current production rates. Occidental owns 49% of the Libyan concession. The rest is owned by Libyan National Oil Corp., the Libyan state-owned company.

Occidental has operated in Libya since 1966, and it has the biggest oil drilling concession in that North African nation.

Although its Libyan oil production accounted for about 20% of Occidental’s income last year of $568.7 million, its importance to Occidental has declined over the years. In 1979, the Libyan concession supplied half of Occidental’s income, and, a decade before that, the company was almost wholly dependent on Libyan oil.

Occidental’s Libyan production has declined dramatically--from 680,000 barrels a day in early 1970 to about 52,000 barrels a day now. Its Libyan production accounted for 19% of Occidental’s worldwide oil production last year.

What Occidental is selling is “a fairly small percentage in the grand total of things,” said John Curti, an analyst with Birr Wilson & Co. in San Francisco. Occidental’s Libyan reserves of 312 million barrels account for about 31% of the company’s total crude oil reserves.

Broke With Industry

Occidental’s Libyan operations have been marked with controversy. In mid-1970, Occidental Chairman Armand Hammer broke with the rest of the oil industry by agreeing to Kadafi’s demand for greater revenue from oil production. That action set the stage for greater increases in the price of crude oil during the Arab oil embargo of 1973.

In 1981, President Reagan asked Americans living in Libya to leave, and, a year later, Reagan banned oil imports from Libya. Occidental said it complied with Reagan’s request by hiring non-Americans to run its Libyan operations.

Reagan’s embargo had little effect on Libyan production, since most Libyan crude traditionally went to Europe.

Exxon withdrew from Libya in 1981, and Mobil withdrew in 1983.