VZCZCXRO2947
PP RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHTRO #0924/01 3361254
ZNY CCCCC ZZH
P 011254Z DEC 08
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC PRIORITY 4196
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
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RUEHLO/AMEMBASSY LONDON PRIORITY 0949
RUEHMD/AMEMBASSY MADRID PRIORITY 0034
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RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHTRO/AMEMBASSY TRIPOLI 4718
C O N F I D E N T I A L SECTION 01 OF 03 TRIPOLI 000924
SIPDIS
DEPT FOR NEA/MAG; ENERGY FOR GINA ERICKSON; COMMERCE FOR NATE
MASON
E.O. 12958: DECL: 12/1/2018
TAGS: ECON EPET PGOV LY
SUBJECT: A RARE PEEK INSIDE LIBYA'S NATIONAL OIL CORPORATION REF: TRIPOLI 915 TRIPOLI 00000924 001.2 OF 003
CLASSIFIED BY: Chris Stevens, CDA, Embassy Tripoli, Department of State. REASON: 1.4 (b), (d)
1. (C) Summary: In a recent meeting, a 15-year veteran of Libya's National Oil Corporation (NOC) gave an insider's
account of widespread dissatisfaction with NOC Chairman Shukri Ghanem's management style. Autocratic, jealous of his
prerogatives and inclined to rely on a small, subservient team, Ghanem has driven many experienced managers into the
private sector and allowed key positions on the NOC's critical management committee to go unfilled, diminishing the
NOC's administrative capacity. International oil companies (IOC's) have benefited to an extent by hiring some
experienced former NOC employees; however, there are concerns that if the NOC's human capacity is denuded much further,
it will cease to be a viable working partner. Ghanem's reluctance to meet regularly with IOC general managers and his
lack of technical expertise have left him isolated and ill-informed at a critical juncture in which Libya is seeking to
significantly expand oil production. End summary.
2. (C) P/E Assistant met with Karima el-Mshawet (strictly protect), a 15-year veteran of Libya's state-owned National
Oil Corporation (NOC) on November 18. El-Mshawet started in the Financial Department, then moved to the Human Resources
Department as a training program coordinator and currently works in the Internal Auditing Department. With around 700
employees, the NOC is responsible for all oil sector operations in Libya. It is developing a plan to realize optimum
returns, exploit Libya's oil reserves (the largest in Africa), and operate and invest in those reserves. The NOC has
publicly stated that it aspires to increase oil production from a current level of 1.7 million barrels/day to some 3.0
million barrels/day by 2012. NOC WAS BETTER-MANAGED UNDER GHANEM'S PREDECESSOR
3. (C) According to Mshawet, the NOC was better managed and more active under its previous chairman, Abdullah Salem
al-Badri (2004-2006), than under its current leader, Shukri Ghanem. Ghanem served as Prime Minister-equivalent in
2004-2006 before moving over to the NOC. El-Mshawet complained that since he took the helm, most NOC employees no longer
have a clear idea of the organization's vision, mission or strategy. There is also greater fear that they could lose
their jobs or be assigned to portfolios outside their areas of expertise. Ghanem is a mercurial personality and a number
of people have been summarily sacked. In addition, the NOC's organizational chart has gone through several dramatic
evolutions in recent years. The example of the gas department is illustrative of this point. There was previously a
natural gas department; however the responsibilities of the department's personnel were never clear. The situation
became even more muddled after the gas department was merged with the investment department; lack of clarity about who
is responsible for what with respect to managing Libya's gas resources is seen as a key hindrance to the NOC's stated
objective of increasing its natural gas production.
AUTOCRATIC STYLE DRIVES OUT EXPERIENCED LEADERS
4. (C) Changes in the ranks of the NOC's senior, experienced personnel due to personality conflicts with Ghanem have
also taken a toll. Several former members of the NOC's key management committee who had repeatedly resisted entreaties
from private sector employers have departed in recent years rather than continue working for Ghanem. Ahmed Aoun, former
head of planning, studies and projects for the management committee, moved to Shell as a deputy managing director.
Ibrahim Elsoul, former head of financial and administrative affairs for the management committee, took a job in banking
in Tunis. NOC Vice Chairman Faraj Said is due to retire this year and, according to el-Mshawet, he probably will not
stay any longer than he has to. ConocoPhillips GM Page Maxson (strictly protect) recently told us that IOC's were in a
tough position. On the one hand, competent Libyan managers were at a premium; on the other, there was concern that
Ghanem could drive out so many qualified staff that IOC's would no longer have a competent national authority (the NOC)
with which to work, a critical problem in a country in which all work on oil and gas is run by the NOC.
5. (C) Ghanem's penchant for a small, tightly-controlled management structure, together with his autocratic style, have
also limited opportunities for experienced NOC employees to weigh in on key decisions. Under the current organizational
chart, virtually all departments report directly to the chairman. In addition, the management committee has been
dramatically reduced in size and now comprises only three officers in addition to the Chairman (Ghanem) and Vice
Chairman TRIPOLI 00000924 002.2 OF 003 (Said): Azzam Ali Elmesallati, head of investment and joint ventures; Abdulkasim
M. Zwary, head of marketing and manufacturing; and Omar Abdulkarim, head of exploration and production. Replacements for
Aoun, former head of planning, and Elsoul, former head of finance - two key portfolios - have not been named. According
to Mshawet, the prevailing view within the NOC is that Ghanem believes the management committee does not need more than
three members beyond the chairman and vice-chairman rumor. Within the ranks of the NOC's professionals, Azzam Elmeslati
is not seen as an influential person, said el-Mshawet, particularly since Ghanem takes key decisions on investments and
joint ventures himself.
NOC'S HEAVY-HANDED APPROACH UNDERMINES HUMAN CAPACITY DEVELOPMENT
6. (C) Human capacity remains a key limiting factor for the NOC, and an area in which Ghanem's leadership has been
wanting. The NOC has a stated policy of developing indigenous capacity in the oil and gas sector, a policy supported by
most IOC's as part of their corporate best practices, and virtually all contracts under the Exploration and Production
Sharing Agreement (EPSA) rubric stipulate that companies will hire specific numbers of Libyans for particular types of
technical jobs. Nonetheless, Libyan graduates, especially petroleum engineers, face problems finding jobs in foreign
companies due to their limited English language skills and lack of IT and technical knowledge. By way of a partial
remedy, the NOC has begun three different training programs for recent Libyan graduates in petroleum engineering,
geology and geophysics, and accounting. The petroleum engineering training program takes 18 months, is offered
continuously and has 100 engineers per class. The programs for accountants and for geologists and geophysicists have not
been held as frequently, in part because those professionals are able to find work in other fields. The NOC has
completed two cycles of training for geology and geophysics (with about 100 students per cadre) and two cycles for
accounting (with about 50 students per cadre).
7. (C) The NOC pressures the IOC's to hire graduates of the three programs sight unseen; however, hard experience with
ostensibly competent personnel who turned out to be unqualified has prompted the IOC's to insist on interviewing
candidates for placement. As reported reftel, a new NOC pressure technique involves linking residence permits for
expatriate IOC workers to decisions by IOC's to hire graduates of the three programs. The idea is that IOC's will be so
desperate to obtain residence permits (a time-consuming and labor-intensive process at best), that they will concede to
hiring the graduates sight unseen just to expedite the process; however, it appears that the effect so far has been to
stiffen, rather than weaken, the resolve of the IOC's to resist the pressure.
8. (C) El-Mshawet said the NOC is aware that many of the graduates are not very capable, despite efforts by the NOC's
training department to select the best they have to farm out to the IOC's. As training programs coordinator, Ms. Mshawet
was in charge of selecting the personnel for the NOC's training programs. In order to be eligible for the program,
candidates are required to meet certain requirements; however, during the last selection cycle, Ghanem insisted that a
candidate who did not meet the standards (he was quite elderly and lacked the appropriate educational background) be
enrolled in the program. When el-Mshawet refused to enroll him, Ghanem moved her to a different department. She
expressed concern that despite the IOC's understanding that Libya needs to develop its indigenous oil and gas management
capacity and their desire to help with that project, Ghanem's management style and approach had alienated the IOC's and
hurt potential cooperation on human capacity development in Libya's most critical economic sector. Libya's long period
of isolation from the international community during the sanctions period and the deterioration of its educational
system had made the problem particularly acute.
GHANEM VIEWED AS ISOLATED, ILL-INFORMED & NOT TECHNICALLY PROFICIENT
9. (C) Despite his eagerness to speak with the international media, particularly about OPEC production and
macro-economic factors affecting oil and gas (other senior OPEC officials reportedly refer to him as "the Libyan media
whore"), el-Mshawet said most NOC professionals share the view that Ghanem lacks the technical and management skills to
properly manage the organization. IOC general managers (GM's) are almost universal in agreeing with that assessment.
British Gas GM Peter Thompson TRIPOLI 00000924 003.2 OF 003 (strictly protect) told P/E Chief that Ghanem's mistaken
belief that he knows everything, together with his autocratic style of management, had left him isolated and
ill-informed. Former ConocoPhillips GM Page Maxson (strictly protect) told P/E Chief that Ghanem was much less willing
to meet with and hear out IOC GM's than his predecessor had been. Maxson typically saw al-Badri, Ghanem's predecessor,
at least once a week and enjoyed a candid, collegial relationship with him. By contrast, he typically only saw Ghanem
when ConocoPhillips' CEO is visiting and the tone was almost always combative (Note: Maxson was recently transferred to
another post outside Libya. End note.) Other GM's have told us that Ghanem is in some respects a throwback to the
circa-1970's Libyan oil managers, who viewed IOC's through a nationalist lens and considered them to be predatory
entities which had to be carefully managed. As reported reftel, the ham-fisted tactics by which unqualified Libyans are
foisted on the IOC's, together with an overweaning focus on identifying new cost centers in the production chain from
which to extract rents from the IOC's, have made the overall operating environment in Libya more difficult for IOC's
since Ghanem took over.
10. (C) Comment: The conversation with el-Mshawet afforded a rare, working-level perspective on the internal management
of Libya's key parastatal entity. Oil and gas revenues generated under the NOC's auspices account for 95 percent of
Libya's economy and everything of significance - the government's budget, salaries, subsidies for food staples and
gasoline - depends on the hydrocarbon sector. The fact that the NOC is in the hands of an autocratic individual who is
ill-regarded by his subordinates and international oil and gas professionals does not augur well for Libya's efforts to
increase production from 1.7 million barrels/day to 3.0 million barrels/day in the next four years. End comment.
STEVENS