At a point in time when any incremental crude source is a welcome addition, it is indeed wonderful to note that the Libyan oil industry, after staying in doldrums for decades is finally undergoing major transformation. Today the Libyan energy infrastructure is at the center of phenomenal changes. And the industry recognizes it too. The nomination of Dr. Shokri Ghanem, the chairman of Libya’s National Oil Corp. for the 2006 Petroleum Executive of the Year award, last week, is a testimonial to the changing times. The award was handed over by none other than Abdallah S. Jum’ah, the Aramco president and the CEO, who was himself declared the executive of the year in 2005. The Libyan energy sector, it seems, is finally waking up after a long and deep slumbers.
Ghanem, a former prime minister of the country, became the head of the state oil company NOC in March this year. Earlier between 2001-03, he had also served as the minister of economy and trade.
Years of neglect, officialdom, sanctions and lack of investments have had disastrous impact on the Libyan energy sectors. In the early 70s Libya was producing somewhere around 3.2 million barrels per day and in 2005, Libyan production was trembling at just 1.7 million barrels per day. With infra-structure crumbling, virtually no major investments, decadent technology and major fields beginning to age, it is no wonder Libyan crude output has been on a downward slope eversince.
Things are now beginning to change. When sanctions against Libya was lifted and the country emerged out from the status of a pariah state, it witnessed a beeline of Western oil industry executives landing at Benghazi airport, in an effort to get a foot inside the lucrative Libyan energy sector. In times, when not much lucrative acreage was available in the region to the oil majors — constantly clamoring of entry barriers in the upstream energy sector all around the oil rich region — the opening of the Libyan fields were regarded as a God gifted opportunity by virtually all of them.
With world keen on bringing to fore new sources, Libya presented an interesting prospect. It was deeply under explored and induction of new technology could help boost the flagging production of the oil rich African state, every one in the industry agreed. Yet huge injection of capital and technology was required in order to achieve the objectives.
Libya has set itself interesting targets. Dr. Shukri Ghanem says, Libya would be able to produce two million barrels per day by mid next year. This in itself is a daunting task, in view of the challenges ahead. However, in the longer run Libya intends to achieve production output of three million bpd — over the next five to seven years. Although the targeted output is still less than the peak attained in mid 70s, yet it presents a major challenge to the Libyan industry managers. Apparently it cannot be achieved without the direct participation of oil majors, the International oil companies (IOCs). An investment of more than $3,500 million per annum are required for a number of years over the next few years in order to achieve the above stated targets. This figure is roughly double the current Libyan budget for capital and operating expenditure. IOCs are thus the key to these objectives, one has to concede and Dr. Ghanem seems alive to this fact.
NOC’s main stated goal currently is to boost oil reserves of the country to 60 billion barrels by 2015. Currently Libya boasts of an estimated oil reserves of more than 39.5 billion barrels. Some NOC officials recently claimed that country’s reserves could be as high as 144 billion barrels — a tall claim indeed, by any means.
In order to achieve its objectives, the NOC is offering a number of blocks for exploration and development. Over the coming years, the NOC plans to hold two rounds a year, covering exploration licenses for at least 104 areas, containing 364 blocks. The Libyan National Oil Company is reportedly also in direct negotiations with a number of oil majors on integrated exploration and development agreements.
Since the lifting of the UN and US trade sanctions in 2004, NOC has already held two highly successful bidding rounds. These rounds have resulted in awarding of 38 licenses to oil majors from Europe, Asia and the US. A third licensing round originally planned for the spring of 2006, is expected now to take place by early 2007.
Years of neglect have taken their toll on Libya’s oil industry. A lot of catching up work is required. Despite some major challenges still hindering the process, things are starting to brighten up. And when Ghanem was selected by the executives of the world’s top energy companies as the Petroleum Executive of the Year, there were indeed reasons for that.
Referring to the interesting phase the Libyan oil industry was passing through, Jum’ah while presenting the award at the Energy Intelligence Oil and Money Conference in London, emphasized that the Libyan crude output was at its highest level in two decades now. “Responding to the world’s energy needs, the Libyan oil industry has recently surpassed a number of key milestones,” he highlighted.
“Foreign investment is also in full swing with a series of highly successful exploration bids that garnered widespread interest by international companies,” Jum’ah said, noting these developments come during an ambitious program aimed at encouraging foreign investments, developing a competitive private sector and expanding the country’s financial infrastructure. And indeed Ghanem has been at the “center of these impressive developments,” one has to underline.
Any incremental source today is welcome to the tight demand-supply crude balance. The entire world has a stake in the developments taking place in Libya and eyes are focused on it.
