Opera 19

Whereas conventional oil production in the Middle East needs prices of $5 to $25 a barrel to break even, unconventional assets typically need $50 to $113 a barrel, according to the International Energy Agency. Most producing countries figure they can keep pumping without new foreign help, but want assistance to develop more ambitious projects that can prevent long-term output decline.

The IEA warned last year that, if the Middle East and North Africa don’t invest enough in oil and gas reserves, oil prices could rocket to $150 a barrel. Among the factors that could push prices to that level, the agency cited “constraints on inward investment as a result of stronger resource nationalism, particularly in regimes seeking to pre-empt popular uprisings.”

For decades, many European companies had enjoyed deals that granted them half of the high-quality oil produced in Libyan fields. Some major oil companies hoped the country would open further to investment after sanctions from Washington were lifted in 2004 and U.S. giants re-entered the North African nation.

But in the years that followed, the Gadhafi regime renegotiated the companies’ share of oil from each field to as low as 12%, from about 50%. Libya’s state-owned National Oil Co. continues to get the bulk of the barrels produced in joint-ventures with oil majors.

Just after the fall of the regime, several foreign oil companies expressed hopes of better terms on existing deals or attractive ones for future contracts. Among the incumbents that expressed hopes in Libyan expansion were France’s Total SA FP.FR -1.78% and Royal Dutch Shell PLC. RDSA.LN -1.95%

“We see Libya as a great opportunity under the new government,” Sara Akbar, chief executive of privately owned Kuwait Energy Co., said in an interview in November. “Under Gadhafi, it was off the radar screen” because of its “very harsh” terms, said Mrs. Akbar, whose company doesn’t have a licence in Libya.

Others took a more cautious approach. Contractual terms “determine what investment you are going to get,” said Martin Bachmann, an exploration and production executive director at Germany’s Wintershall Holding GmbH at the time. “That’s for the new leadership to consider.”

Libya’s oil officials say they will maintain the predetermined levels of payouts for existing contracts, which cover conventional oil production and exploration. The officials say no new deals will be signed before elections scheduled for June.

Even then, any changes to the current investment framework would be acceptable only in unproven areas such as deep offshore, or in unconventional oil and gas projects, said Tamim Osman, an adviser to the country’s largest state-owned producing operation, Arabian Gulf Oil Co.

Libya’s National Oil Co., Mr. Osman added, might look for a foreign partner to develop southeast Libya’s Kufra basin, where hydrocarbons are thought be trapped in thick, porous sandstone formations. In such cases, producing nations depend on the private companies for new technology and know-how.

“Anybody who is trying the unproven, high-risk areas should be given improved terms,” Mr. Osman said. “But in areas where oil has already been discovered, there is no such need.”

In spite of some hopes to the contrary, that leaves international oil companies looking largely at high-risk, high-cost leftovers.

“I don’t think it’s nice to see that IOCs only get called [by state companies] on unconventional” projects, Total’s Chief Executive Christophe de Margerie said on the side of a Kuwait conference in March. “Conventional is kept for national oil companies. If we could have a little mix, it could be better for us.”

But something important has happened: Facing a situation in which the principle of nonintervention doesn’t tell it what to do, China has been forced to join the United States and other countries, as well as the African Union, in actively trying to end a brutal conflict. China has supported Sudan over the last decade because Sudan supplied China with oil. Last year, however, when South Sudan became independent, Khartoum lost most of its oil-producing territory. China immediately began courting the new country with visits from senior officials and a blizzard of proposed investment deals. Only last week, while South Sudanese President Salva Kiir was in Beijing, China announced an $8 billion loan to the new country to build major infrastructure projects. But though South Sudan has most of the oil, Sudan has the pipelines and the refining equipment. So China needs both countries — and the rising spiral of violence between them, provoked largely though not wholly by Khartoum, has forced China to get off the sidelines.

It has been instructive watching Beijing try to avoid taking responsibility. Soon after partition, Khartoum began a savage campaign of aerial bombardment against civilians in the border area of South Kordofan. Sudan claimed that the region fell within its territory, and China obligingly blocked all attempts to raise the issue in the Security Council. Sudan was in fact using violence, as well as the threat of further violence, to improve its position in negotiations with South Sudan on issues over disputed borders and the sharing of oil revenues. Then Khartoum tried to blackmail South Sudan by refusing to deliver oil pumped in South Sudan to its intended customers, bringing talks over revenue-sharing to a sudden halt. This finally provoked a visit from a Chinese envoy, who tried to encourage the two sides to reach a deal. It was too late though; South Sudanese officials didn’t trust Khartoum or Beijing. This year, South Sudan simply stopped pumping oil and then demonstrated its impatience with Chinese support for Khartoum by booting a leading Chinese oil company executive out of the country.

That finally got China’s attention. As one Chinese official told a researcher from the International Crisis Group, “We cannot just be bystanders; we need to be a player. Can you imagine how any Western country would engage if they had all these interests?” China didn’t change its view of its own interests, but, rather, recognized that it could not defend its narrow mercantile interests through narrow mercantile means. China had become too central a player to let others deal with the mess of conflict. Foreign Minister Yang Jiechi was dispatched to Addis Ababa, Ethiopia, to meet with, and mollify, Kiir; in March, a new special envoy for Africa came to Juba, the South Sudanese capital, and made a point of meeting with the U.S. special envoy for Sudan, Princeton Lyman. In late March, U.S. President Barack Obama discussed Sudan with Chinese President Hu Jintao on the sidelines of the nonproliferation summit in Seoul. In his official statement Hu said, “China and the United States should continue to exert their own influence [and] encourage Sudan and South Sudan to resolve their outstanding issues through negotiation.”