State-owned National Oil Corporation (NOC) is reviewing the contractual terms offered to international oil companies (IOCs) as it plans to attract firms to develop its unconventional oil and gas reserves.

A new Oil and Gas law is also being proposed, which will take into account the potential for new developments, according to a senior NOC manager speaking at the Mena Shale conference in Abu Dhabi on 10 December. 

“We need to update the Petroleum Law to cover shale and unconventional hydrocarbons,” says Bashir Garea, NOC’s exploration division manager.

“We need new regulations on the role of NOC, which is the sector’s regulator and operator, on exploration and new fiscal and contractual terms,” he says. “At the moment, we offer 10-15 per cent shares for oil and about 20 per cent for gas developments.”

“This will not be enough for unconventional developments, so we will need to increase this to about 40 per cent.”

Garea adds that NOC is currently reviewing its existing exploration and production sharing agreement (EPSA) model, which was used in previous bidding rounds, but only deals with conventional resources. NOC plans to invite a number of international oil and service companies to conduct joint resource evaluation studies and pilot drilling programmes in 2014, followed by geochemical and geomechanical studies. It is currently in discussions with Dubai-based services firm Schlumberger to conduct pilot drilling.

“Full development will have to wait for the passage of a new Petroleum Law,” he says. “But we need a constitution before we can have a new law. We hope to have this in early 2014.”

The US’ Energy Information Administration (EIA) estimates Libya has shale oil resources of 26 billion barrels, out of a global total of 345 billion barrels.

NOC has already identified three shale gas plays: the Silurvian and Devonian formations in the west of Libya and Cretaceous formations in the centre of the country. The country’s current proven reserves are estimated at 55 trillion cubic feet of gas. In house studies estimated Libya’s unconventional gas reserves at as much as 136 trillion cubic feet and 24 billion barrels of oil.

Libya’s total gas production averaged about 2.2 billion cubic feet a day (cf/d) in 2012, but the figure has dropped over the past two months to less than 1.6 billion cf/d due to ongoing strikes at downstream processing and export facilities, which have hit crude production.

The biggest challenge for the development of shale oil and gas in Libya are the technologies required for development, the contractual terms offered to IOCs and the logistics of drilling thousands of new wells and tying them into the midstream infrastructure.