| ABOUT LIBYA |
Oil exploration in Libya began in 1955, with the key national Petroleum Law No. 25 enacted in April of that year
(a new petroleum law is currently under development). Libya's first oil fields were discovered in 1959
(at Amal and Zelten -- now known as Nasser), and oil exports began in 1961. During 2004, Libyan oil production
was estimated at nearly 1.6 million barrels per day (bbl/d), with consumption of 237,000 bbl/d and net exports
of about 1.34 million bbl/d. The vast majority (more than 90%) of Libya's exports are sold to European countries
like Italy (545,000 bbl/d in January-October 2004), Germany (274,000 bbl/d), France (94,000 bbl/d), Spain and Greece.
In addition, Libyan oil exports to the United States reached 66,000 bbl/d in October 2004, after resuming in
June 2004 for the first time in two decades.
Overall, Libya would like foreign Companies help to increase the country's oil production capacity from 1.60 million
bbl/d at present to 2 million bbl/d by 2008-2010, and to 3 million bbl/d by 2015. In order to achieve this goal,
and also to upgrade its oil infrastructure in general, Libya is seeking as much as $30 billion in foreign investment
over that period. Libya is considered a highly attractive oil province due to its low cost of oil recovery
(as low as $1 per barrel at some fields), the high quality of its oil,its proximity to European markets,
and its well-developed infrastructure.
If Libya reaches 2 million bbl/d in oil production capacity, this would take the country back to a level it has not
seen since the late 1970s. During that decade, Libya's revolutionary government imposed tough terms on producing
companies, leading to a slide in oilfield investments and oil production -- from 3.3 million bbl/d in 1970 to 1.5
million bbl/d in 1975, before rising again to 2.1 million bbl/d in 1979. During the 1980s, Libyan oil production
averaged around 1.2 million bbl/d, rising to around 1.4 million bbl/d in the 1990s. Libya's main oil export grades
include Es Sider (36-37o API), El Sharara (44o API), Zueitina (42oAPI), Bu Attifel (41o API), Brega (40o API), Sirtica
(40o API), Sarir (38o API), Amna (36o API), and ElBouri (26o API). Most Libyan oil is sold on a term basis, including
to the country's Oilinvest marketing network in Europe; to companies like Agip, OMV, Repsol YPF, Tupras, CEPSA, and
Total; and small volumes to Asian and South African companies. Libyan oil is generally light (high API gravity) and
sweet (low sulfur), but also thick and waxy.
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Reserves & Geology:
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Currently, according to the Oil and Gas Journal, Libya has total proven oil reserves of 39 billion barrels.
The country has 12 oil fields with reserves of 1 billion barrels or more each, and two others with reserves
of 500 million-1 billion barrels. However, Libya remains "highly unexplored" according to Wood Mackenzie
Consultants, and has "excellent" potential for more oil discoveries. In addition, despite years of oil
production, only around 25% of Libya's area covered by agreements with oil companies. The under-exploration
of Libya is due largely to sanctions and also to stringent fiscal terms imposed by Libya on foreign oil companies.
On January 30, 2005, Libya held its first round of oil and gas exploration leases since the United States ended most
sanctions against the country. Known as EPSA 4, the round -- launched in August 2004 – offered 15 exploration areas
for auction. Approximately 56 companies registered 104 bids, but in the end only a handful of companies actually won
acreage in the intensely competitive bidding. In the end, acreage in 9 areas (5 onshore oil blocks and 4 offshore,
gas-prone blocks) went to U.S.-based Occidental Petroleum, while Chevron Texaco and Amerada Hess won acreage in 1
block each. Other companies with winning bids included the Indian Oil Corp., Liwa (UAE), Oil Search Ltd. (Australia),
Petrobras (Brazil), Sonatrach (Algeria), Verenex (Canada), and Woodside (Australia). Significantly, no European companies
were awarded acreage in this round.
Specifically, an Occidental-Liwa consortium won onshore blocks 131 and 136 in the Murzuq basin, plus onshore blocks
106 and 124 in the Sirte area, and block 59 in the Cyrenaica area near the Egyptian border. Occidental also won
offshore block 53 (Gulf of Sirte), with offshore blocks 35, 36 and 52 (all Gulf of Sirte) going to an
Occidental/ Liwa/Woodside consortium. Sonatrach won onshore block 65 (Ghadames), with a Verenex-led group getting
onshore block 47 (North Ghadames, near Tunisia). Petrobras won offshore block 18 (Gulf of Sirte), Indian Oil Corp.
won block 86 (West Sirte), and Amerada Hess won offshore block 54 (Gulf of Sirte). It is believed that winning
companies paid a high price for Libyan acreage -- reportedly on both signature bonuses and production shares --
highlighting the great degree of interest in the relatively underexplored country. Occidental, for instance,
paid $25.6 million for Block 106 alone.
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Refining & Marketing:
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Libya has five domestic refineries, with a combined nameplate capacity of approximately 380,000 bbl/d,
significantly higher than the volume of domestic oil consumption (227,000 bbl/d; the rest is exported).
Libya's refineries include: 1) the Ras Lanuf export refinery, completed in 1984 and located on the Gulf
of Sirte, with a crude oil refining capacity of 220,000 bbl/d; 2) the Az Zawiya refinery, completed in
1974 and located in northwestern Libya, with crude processing capacity of 120,000 bbl/d; 3) the Tobruk
refinery, with crude capacity of 20,000 bbl/d; 4) Brega, the oldest refinery in Libya, located near
Tobruk with crude capacity of 10,000 bbl/d; and 5) Sarir, a topping facility with 10,000 bbl/d of capacity.
In May 2002, Libya signed a $280 millioncontract with South Korea's LG Petrochemicals to upgrade Az Zawiya.
In addition, Ras Lanuf also is slated for upgrading, although that project appears to have been delayed.
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Natural Gas:
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Continued expansion of natural gas production remains a high priority for Libya for two main reasons.
First, Libya has aimed -- with limited success -- to use natural gas instead of oil domestically (i.e.,
for power generation), freeing up more oil for export. Second, Libya has vast natural gas reserves and
is looking to increase its gas exports, particularly to Europe. Libya's proven natural gas reserves as
of January 1, 2005 were estimated at 52 Tcf by the Oil and Gas Journal, but the country's actual gas
reserves are largely unexploited (and unexplored), and thought by Libyan experts to be considerably
larger, possibly 70-100 Tcf. Major producing fields include Attahadi, Defa-Waha, Hatiba, Zelten, Sahl,
and Assumud. To expand its gas production, marketing, and distribution, Libya is looking to foreign
participation and investment. In recent years large new discoveries have been made in the Ghadames and
el-Bouri fields, as well as in the Sirte basin. Libya also produces a small amount of liquefied petroleum
gas (LPG), most of which is consumed by domestic refineries.
Yet another proposal is to build a nearly 900-mile pipeline from North Africa to southern Europe. Such a
pipeline could transport natural gas from Egypt, Libya, Tunisia and Algeria, via Morocco and into Spain
(a pipeline between Morocco and Spain already exists). Also, Tunisia and Libya agreed in May 1997 to set
up a joint venture which will build a natural gas pipeline from the Mellita area in Libya to the southern
Tunisian city and industrial zone of Gabes. In late 1998, Tunisia and Libya signed an agreement for around
70 Bcf of gas per year to be delivered from Libyan gas fields to Cap Bon, Tunisia, and in October 2003 the
two countries set up a joint venture gas company to build the pipeline. Completion by 2005 is anticipated.
In 1971, Libya became the second country in the world (after Algeria in 1964) to export liquefied natural gas
(LNG). Since then, Libya's LNG exports have generally languished, largely due to technical limitations which
do not allow Libya to extract LPG from the LNG, thereby forcing the buyer to do so. Libya's LNG plant, at Marsa
El Brega, was built in the late 1960s by Esso and has a nominal capacity of about 125 Bcf per year. However,
US sanctions prevented Libya from obtaining needed equipment to separate out liquefied petroleum gas (LPG) from
the natural gas, thereby limiting the plant's output to about 15% of nameplate capacity, all of which is exported
to Spain.
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