After decades of isolation, Libya is emerging as the hottest prospect for oil and gas exploration in the Middle East.
Europe's big operators are lining up to develop possible undiscovered resources estimated by the National Oil Corporation (NOC) at more than three trillion cubic meters. The warming of relations between European governments and Libyan leader Muammar Qadhafi is speeding up the process.
The summer of cooperation over the Lockerbie trial and the release of hostages held by the Abu Sayyaf Islamist group in the Philippines has boosted prospective investors' confidence.
Not all Europe's leading oil and gas companies have neglected Libya in recent years. Italy's Agip has a long history of working in the North African state and is the country's largest foreign producer. France's TotalFinaElf, Spain's Repsol and the UK's Lasmo are also present and, along with Agip, are pressing ahead with new development and exploration.
They are now being joined by other big European operators, including the Royal Dutch/Shell Group and BP of the UK, keen to gain a foothold in what promises to be a rewarding area of production.
The Royal Dutch/Shell Group has emphasized its renewed interest in Libya by creating a new operating subsidiary, Shell Libya Petroleum Development Company.
"Shell is currently discussing new exploration and production activities with NOC to explore how Shell can contribute to Libya's oil and gas industry," says managing director Joep Coppes. "A dedicated company was created in June to support these initiatives."
Rising foreign interest in Libya has been fuelled by NOC's decision to release a new round of exploration licenses.
In May, the state-owned company unveiled plans to offer foreign parties up to 70 percent of the remaining unexplored acreage in six key basins, as part of plans to raise production capacity to 2 million barrels a day (b/d), from 1.4 million b/d, over the next five years.
Initially, NOC is offering 14 blocks mainly in the Sirte and Murzuq basins. They have been bundled into three packages for auction.
Interest in the new acreage has been high. In May, representatives from 50 companies attended a meeting in Tripoli, outlining the new licenses. No deadline has been given for the license issue, but NOC confirms several big European oil companies have already submitted applications.
Foreign oil companies have been attracted by the quality of the country's sweet crude oil, the market's close proximity to Europe and favorable extraction costs. Onshore production costs in Libya can be as little as $1 a barrel.
Even offshore costs are considered low by world standards, because of the shallowness of the Mediterranean.
Ironically, the strong international response to NOC's announcement appears to be delaying the award of licenses. European oil executives say the sheer number of smaller operators seeking to cash in on the newly released acreage is slowing the whole process down.
Some have also expressed concern that further delays could arise from the early-October departure from NOC of Abdullah Salem Al Badri, the widely respected former oil minister. However, NOC has moved to reassure companies, saying Al Badri's appointment as assistant minister for services will not affect the licensing round and that the data rooms will be closed in November.
It is in NOC's interest to push ahead with the award of licenses as soon as possible. Libyan oil capacity has remained stagnant at 1.3 million-1.4 million b/d for a decade, because of lack of investment.
The industry has also been hit by the continuing absence of US companies – the dominant force in the sector until the 1980s.
US oil majors are still prohibited from operating in Libya by the 1996 Iran Libya Sanctions Act (ILSA), which bans investment of more than $20 million in either market. Nevertheless, companies have been maintaining contact with NOC.
In late 1999, executives from Amerada Hess, Conoco, Marathon Oil Company and Occidental Petroleum Corporation were all given permission to visit their old Libyan facilities.
Tripoli is keen to see the Americans return, not least because it would offset the European influence.
"The regime wants to re-establish a domestic balance of power among operators," says Raad Al Kadiri, country analyst at Washington-based Petroleum Finance Company. "But the Libyans will only wait so long for US companies." –AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)