Yahoo Finance Oil Majors Keen On Libya’s Untapped Potential
Following the failed Presidential elections of December 2021 and its negative impact on the oil and gas industry, Libya’s oil production started to get back on track in the second half of 2022, aimed at boosting production in line with high global demand and elevated prices. And things are looking up for 2023, with increased foreign investment in Libya’s oil and gas sector, as well as support from the IMF. The government hopes to improve national industry standards to meet international expectations through its new strategic plan, helping to boost production and attract investment in new projects.
In February this year, the NOC introduced a new strategic plan to revitalise Libya’s oil and gas sector, in collaboration with the U.S. firm KBR. It created the Strategic Programs Office to implement this plan to help the company “keep pace with developments in this sector worldwide.” The strategy is expected to help the Libyan National Oil Corporation (NOC) increase Libya’s oil output to 2 million bpd in three to five years, from around 1.2 million bpd at present. The country’s output stood at around 1.6 million bpd prior to the 2011 Arab Spring but has been steadily decreasing ever since, due to political volatility and conflict. But to achieve this output increase, Libya needs to attract much more investment in its oil and gas industry, particularly in exploration, to ensure the longevity of the sector.
Iliasse Sdiqui, associate director at Whispering Bell, a risk management company covering North Africa, stated: “The idea is that to draw foreign investment you need to be more transparent, and you need to enable IOCs to take a look at your books.” Sdiqui added, “This strategic program office is (set up) both to enable IOCs to be comfortable with channelling money into the east and also to satisfy the local communities in the region.” And “The pressure for more fiscal transparency comes from the top, from the US, and from the international community.”
Under the plan, new oil and gas blocks will be offered for exploration for the first time in more than 17 years. In May, three international oil majors, Italian Eni, French Total, and UAE-based Adnoc, entered into talks with the NOC about the potential development and exploration of oil and gas fields in the NC7 block in the Ghadames Basin. Eni continues to be the biggest foreign investor in Libya’s oil and gas sector, having begun operations in 1959. The company produced 198 Bcf of gas in Libya in 2021 and transported the gas to Italy via the 520-km Green Stream pipeline.
In February, Eni became the first international oil company to announce a new project in Libya for more than two decades. Eni signed an agreement with the NOC to develop offshore operations aimed at producing 750 MMcf/d of natural gas by tapping estimated reserves of 6 trillion cubic feet.
The IMF expects Libya’s oil production to increase by around 15 percent in 2023 thanks to an output rise of 1 million bpd in 2022. The IMF stated, “Libya’s economic fortunes will hinge on oil and gas production for the foreseeable future.” The country has long been highly dependent on revenues from oil and gas production, holding around 3 percent of the world’s oil reserves and 39 percent of Africa’s.
At present, Libya’s financial stability is under threat from the global green transition, suggesting the need for greater economic diversification to ensure increased security in the future. But for now, the country’s oil and gas industry is performing much better than expected coming out of the turmoil of 2021.
In May, Zallaf Libya Oil and Gas, a subsidiary of the NOC, announced that output at the Erawin oilfield has increased to more than 92,000 bpd. The company hopes to achieve 100,000 bpd of production at Erawin. And the Russian oil company Tatneft’s Libyan branch discovered an oil well in the Ghadames Basin, producing 1,870 bpd of at a depth of 8,500 feet.
In addition to increasing output, Libya hopes to improve the standards of oil production to meet international expectations to enhance the export potential and attract greater investment in the sector. Farhat Bengdara, NOC’s chairman, stated that the company is aiming to increase production as well as to reach global standards in the sector. He suggested that raising output will help to boost the salaries of those working in oil and gas, as well as helping to stabilise the exchange rate of the dollar and boosting energy security.
Thanks to the introduction of a new strategic plan, Libya has begun to boost its oil output as well as attract greater foreign attention. The hope is to improve standards to encourage new foreign investments in exploration and production operations while the global demand for oil and gas remains high. Revenues from new projects could also help Libya to pursue a strategy of economic diversification to enhance its financial stability in a global green transition.
By Felicity Bradstock for Oilprice.com
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