5th UPDATE: Libya Oil Chief Urges Libyan Stake In BP

(Recasts lead, adds further comments, details.) By Tahani Karrar-Lewsley Of ZAWYA DOW JONES DUBAI (Zawya Dow Jones)--BP PLC (BP) shares rose 5.6% Monday to lead London's FTSE100 index after Libya's top oil official told Zawya Dow Jones his country should buy a strategic stake in the British oil major to take advantage of its weak share price. Shokri Ghanem, chairman of Libya's National Oil Co., said he will recommend buying a stake in BP to the Libyan Investment Authority, or LIA, the North African state's sovereign wealth fund. BP shares are down about 48% since April 20, when an explosion on Transocean Ltd.'s (RIG) Deepwater Horizon drilling rig--leased by BP for its Macondo well in the Gulf of Mexico--killed 11 workers and triggered one of the worst oil spill disasters the U.S. has ever seen. "BP is interesting now with the price lower by half, and I still have trust in BP. I will recommend it to the LIA," Ghanem said in a telephone interview Monday. "It's a good opportunity for bargain hunters." Ghanem's remarks follow press speculation that oil-rich Middle East investors are considering a strategic investment in BP as it continues to try to contain and clean up its U.S. oil spill. Now in its 76th day, the spill has hurt Gulf of Mexico fishing and tourism industries. "We are not selling any assets right now, but we do wish to sell $10 billion of non-core upstream assets over the next 12 months; if people want to buy BP shares we always welcome new shareholders," said John Pack, a London-based spokesperson for BP. Despite the sharp plunge in BP shares since late April, they rose as much as 5.6% Monday following the news of potential sovereign wealth fund interest in a BP stake. At 1447 GMT, BP was up 15 pence, or 4.7%, at 337 pence. "Gulf sovereign wealth funds and other investors from the region might express interest given the record of investing in companies in distress which have brought confidence and placed a 'floor' under the companies' share price and prevented further depreciation," said John Sfakinakis, chief economist at Riyadh-based Banque Saudi Fransi-Credit Agricole. Kuwait Investment Authority already owns 2.8% of BP, and Norway's sovereign wealth fund owns 1.3%, according to data provider FactSet. Kuwait-based oil analyst Kamel Al Harami said, however, that BP may not be interested in further investments from Kuwait. That's because the Kuwait parliament has become more interventionist in energy activities by foreign oil companies doing business there. "Kuwait may be interested, but it will be a lengthy process because of the parliament and the politics, so that may be unattractive for BP," said Al Harami. Mohammed Layas, executive director of the Libyan Investment Authority, told Zawya Dow Jones Monday he had "no comment at this stage." The LIA in 2008 acquired a stake of below 2% in Italy's Eni SpA (E), which has extensive operations in Libya, after buying shares on the open market. The state fund was also targeting other energy investments including in international oil companies, Ghanem said in June 2009. "A stake in BP could bring privileged access to sophisticated production know-how," said Eckart Woertz, director of economic studies at the Dubai-based Gulf Research Center. Libya has stepped up overseas investments since economic sanctions were lifted from the country in 2004. It has also attracted significant investments from oil firms including Eni, Total S.A. (TOT) and Occidental Petroleum (OXY) in recent years. BP and its Libyan partner, the Libya Investment Corp., or LIC, in May 2007 signed an exploration and production deal with Libya's National Oil Co. worth at least $900 million for the onshore Ghadames and offshore Sirt areas, covering an exploration area of around 54,000 square kilometers. BP said earlier Monday the cost of the response to the Gulf of Mexico oil spill so far is $3.12 billion, as it ramps up oil-containment efforts following storm surges caused by Hurricane Alex. The cost figure includes containment, relief-well drilling, grants to Gulf states, claims paid and federal costs, BP said in a statement. -By Tahani Karrar-Lewsley, Dow Jones Newswires; +9714 446-1692; Tahani.Karrar@dowjones.com (Jeffrey Sparshott and Selina Williams in London and Summer Said in Riyadh contributed to this report.) (END) Dow Jones Newswires July 05, 2010 11:07 ET (15:07 GMT)