Survey Editor
Declaring his country "open for business," a top Libyan oil official said May 5 he expects the state-owned National Oil Corp. (NOC) to offer eight exploratory blocks for bid under its EPSA-4 (exploration and production-sharing agreement) bidding round this summer.
The eight blocks are meant to be a representative sample of what is available onshore and offshore, NOC said. For this round, the blocks include parcels in the gas-prone western Ghadames basin and in the northeast Cyreaica-Botnan basin. Two offshore blocks also will be offered; the remaining onshore acreage will be in the western Murzuq basin and in Sirt, the country's central region.
NOC officials anticipate keen interest from US majors and large independents, which for the first time in nearly 2 decades will be allowed to cut deals. Citing Libya's efforts to fight terrorism domestically and abroad, the White House last month surprised many companies when it lifted most economic sanctions against the country before the November presidential election (OGJ Online, Apr. 28, 2004).
Libya's goals
Libya is eager to respond; NOC said it wants to produce 2 million b/d by 2007, a figure that will require approval from fellow members with the Organization of Petroleum Exporting Countries.
"I'm glad things are behind us and we can get back to business," NOC Director of Planning and Information Technology Director Tarek Hassan-Beck told reporters May 6 at the Offshore Technology Conference in Houston. Hassan-Beck earlier in his professional career worked for Exxon Corp. (now ExxonMobil Corp.)
Libya's current oil production quota is 1.26 million b/d. NOC has told companies it wants to drill 100 wells in next 5 years, mostly onshore. NOC's pipeline network can handle the new production because excess capacity is available, NOC said. And in an effort to quell concerns over possible sabotage, NOC insisted the system is "closely monitored" and well maintained.
NOC estimates that its oil and gas reserves are 38 billion bbl and 54 tcf, respectively. There are now 50 oil fields producing a total of 1.3 million b/d although capacity is 1.8 million b/d. On the gas side, there are 5 fields collectively producing 1.4 bcf/d. Analysts see a lot of potential particularly on the gas side.
Responding to Wall Street expectations, NOC said it sees creating a gas export business as a top priority. It is interested in building an LNG plant and is planning to extend its gas pipeline network east to Egypt and west to Tunisia as fields come online.
It also plans on using gas for enhanced oil recovery, petrochemical production, and cement, steel, and electric power plants. To that end, NOC said it wants to invest $10 billion in its downstream sector; about $4 billion of that would be earmarked to upgrade and expand five existing refineries. Those plants are 20-50 years old and NOC wants to produce European-grade fuels, Hassan-Beck said.
NOC also wants to build a new facility at Sebha. Current total refinery capacity is 380,000 b/d, with most of that production used domestically. NOC said it is also might designate the 220,000 b/d refinery complex at Ras Lanuf as a "free trade zone."
EPSA-4 round
This summer, bidding will be on a single block basis per agreement, but multiblock rounds will not be dismissed. Hassan-Beck declined to spell out specific terms of the new EPSA although in road terms he said that a minimum exploration program would be "predetermined" for each block.
Some analysts have suggested that to attract US companies, NOC's fiscal terms might need to be loosened. According to Deutsche Bank Securities Inc., NOC generally takes 50-75% of all blocks and 90% of the profit oil.
NOC officials have pledged that this latest round will be more competitive.
Hassan-Beck said the new round would be "comprehensive and easy to administer." NOC plans to shorten and expedite the contracting process; he said all future exploration agreements would be based on public competitive bids. He said the agreements will be "5 year sets, and the partner pays."
At the development stage, the investment will be 50-50; PSAs will range from 50-50 split to a ratio of 30-70, but that too will "be negotiable," he said. NOC also plans to offer "further incentives," but he did not specify what that meant. But if history is any indication, upstream negotiations could take awhile: the last licensing round was in 2000 and licenses were only recently awarded in early 2004.
Nevertheless that slow pace might not be indicative of what happens this summer, US companies are hoping that the geopolitical thaw between Washington, DC, and Tripoli will spur good will at the negotiation table. NOC said that foreign companies invested more than $1 billion under EPSA-3.
