VZCZCXYZ0005
RR RUEHWEB

DE RUEHIN #4158 3540703
ZNR UUUUU ZZH
R 200703Z DEC 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 3493
INFO RUEHBJ/AMEMBASSY BEIJING 6113
RUEHUL/AMEMBASSY SEOUL 8345
RUEHKO/AMEMBASSY TOKYO 8317
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS AIT TAIPEI 004158 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DOE/PI FOR R. PRICE 
 
E.O. 12958: N/A 
TAGS: ENRG EPET PREL LY TW
SUBJECT: TAIWAN BIDS ON LIBYAN OIL 
 
 
¶1.  (SBU) SUMMARY.  According to local news reports Taiwan's state 
owned China Petroleum Corp (CPC) sent its general manager 
Chen Pao-lang November 21 on a 13-day fact-finding mission to 
Libya to look at oil exploration and investment 
opportunities.  Following that, CPC announced Nov. 28 it was 
bidding on oil concessions in Libya and would also conduct a 
feasibility study on a petrochemicals complex to be built in 
Libya. This will be Taiwan's first energy investment in the 
Middle East and could reap great benefits to the energy-poor 
island.  END SUMMARY 
 
LIBYAN OIL FOR THE HIGHEST BIDDER 
--------------------------------- 
 
¶2.  (SBU) Libya is rated as one of the five top oil and gas 
exploration areas with discovered resources of more than 43 
billion barrels of oil and an estimated 35 billion barrels in 
reserves.  Taiwan's president Chen Shui-bian made a 
publicized stop-over in Libya on his return from a Latin 
American trip in May 2005.  During that trip it was announced 
that Taiwan would set up representative offices with Libya, a 
move that clearly indicated Taiwan's priority in establishing 
some commercial connection with the oil-rich country. 
Furthermore, Libya is not as dependent on financial aid as 
the other African partners Taiwan has worked so hard to keep. 
 
TAIWAN ASKED TO INVEST IN PETROCHEMICAL COMPLEX 
--------------------------------------------- -- 
 
¶3. (SBU) CPC officials told AIT the oil concessions are in an area 
outside of existing oil production fields which are run by 
the oil majors, but is believed to hold rich oil reserves. 
CPC officials did not want to divulge the extent of their 
bidding only limiting to say that the bidding process is 
ongoing (Note. according to news sources, CPC will submit 
bids for one to three blocks before December 20. The 
exploration and contract fee for each block is $4.2 million 
to $5.2 million. Bid winners will be announced Dec. 20. End 
note.).  According to news sources, the Libyan government has 
also invited CPC to invest in a petrochemical zone in Libya 
and CPC will conduct a feasibility study.  Officials at 
Formosa Petrochemicals (FP) CPC's main competitor in the oil 
and gas sector told AIT that they have not considered 
investing in Libya because of the high risk and will only 
consider joint ventures with one of the oil majors. (Note. 
CPC is government owned and its main market is internal, FP 
is privately owned and buys oil on the market and sells most 
of its refined oil overseas. End note.) 
 
COMMENT 
------- 
 
¶4.  (SBU)  Taiwan's CPC owns and operates four oil fields in 
Indonesia, Ecuador and Venezuela and is exploring for oil in 
Chad.  While the latest bid on Libyan oil appears risky to 
Taiwan's private-sector oil company, CPC may be trying to 
diversify its oil sources to ensure a steady supply of oil 
for Taiwan's increasing energy needs.  As a state-owned 
enterprise, CPC may also be influenced by Taiwan authorities' 
interest in promoting ties with Libya.  CPC's economic 
interests are also served by the higher profit margins (up to 
20 percent) available from operating its own fields versus 
the 5-10 percent when buying on the open market.  CPC is 
likely to continue pursuing overseas oil exploration.  END 
COMMENT. 
 
WANG