Libya's energy potential lures investors

From production of just 1.3 million barrels-per-day (bpd) in 2003, Libya has succeeded in increasing crude output to a little over 1.8 million bpd currently and hopes to reach a target of three million bpd by 2013 and more subsequently, though observers believe this level is unlikely to be met without deeper foreign involvement.

While Libya has begun a wider-ranging, though often slow-moving, reform of its moribund economy, lengthy delays still deter many firms from doing business there.

As a result of the country's history of sanctions and its slow, inefficient bureaucracy, vast areas of the country remain untouched by drilling activity.

However, oil and gas prospects continue to act as a magnet. After Tripoli abandoned its nuclear weapons programme five years ago the country has attracted a growing number of major international oil companies as the country is considered to be one of the few places left in the world where potentially large field discoveries on and off shore are still possible.

Hidden reserves

Experts consider that Libyan oil and gas reserves are considerably higher than the officially listed figure of 41.5 billion barrels of crude and 51 billion cubic feet of gas.

The country's crude reserves are also generally sweet and light and highly attractive to refiners. Libyan fields also have faster routes to customers in Europe and North America than Gulf producers.

As a result, some $10bn of foreign investments have flowed into Libya's oil sector since the end of 2003 when sanctions ended. Tens of thousands of kilometres of 2D and 3D seismic surveys have been carried out in the search for locations for exploration drilling.

Foreign investment

More than 30 companies are hoping to emulate the success of Italy's Eni, which in 1997 discovered the Elephant Field, which now produces 150,000 bpd. Priorities for exploration include new areas in the Sirte, Ghadames and Murzuq basins as well as unexplored areas such as Khufra and Cyrenaica.

Eni is now the largest foreign oil operator in Libya with a production of 550,000 bpd. The Italian company has outlined $14bn of investment over the next ten years mainly to boost Libya's natural gas export capacity to supply Europe.

Not surprisingly it is Eni, which recently had its oil and gas concessions in Libya extended 25 years, that is thought to be the current front runner if the NOC's merger strategy progresses.

BP is also very active in Libya and is moving into an appraisal phase drilling in acreage in the offshore Sirte and Ghandames basins close to Tunisia following a $2bn agreement reached with NOC in 2007. As well as extensive seismic testing, some 18 exploration wells are due to be drilled.