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Libya Oil analyst’s note

Libya’s Oil Ministry is preparing a strategic plan for the country’s oil and gas sector that will set out the future investment requirements for one of the region’s largest potential project markets.

Sources in Tripoli say the Oil Ministry has put together a team of officials to come up with two plans, one for the upstream oil and gas sector, and another plan for the downstream sector. The latter could be completed before the middle of the 2013. The upstream plan is expected to be completed by the end of the year.

Officials from Libya’s first post-Gaddafi government, the National Transitional Council (NTC), suggested the country could target 2.2 million barrels a day (b/d) by 2015 and as much as 3 million b/d by 2020. The NTC plans were sketchy at the time, however, as it handed over power in June last year to the General National Congress (GNC), itself another transitional body.

Some officials at state-owned National Oil Corporation (NOC) complain about the lack of clarity. “There is no long-term plan at the moment and the old ones need updating. This makes resources and planning anything difficult,” says one source at the company.

“In the short term, the aim is to restore production to 1.7 million b/d by the end of the year. Over the next three to five years, we may look at raising production to 2.1 million b/d, but it’s still not clear.”

“Everyone outside Libya was surprised at how quickly the country got back up to 1.5 million b/d,” says a source at one of NOC’s joint-venture operating companies. The challenge now will be increasingly production.

Most of the oil and gas field spending, for this year at least, will be focused on development drilling projects for new wells and injectors. Along with this will be some work on rebuilding surface facilities, such as power plants and compressors, many of which are approaching 40 years old.

These projects, however, will be relatively small, the kind of quick wins that will help maintain production levels. But there is a dearth of major engineering, procurement and construction (EPC) projects planned for this year. The only deal that has caused any excitement among EPC firms is expected for the construction of a subsea production system for Mellitah Oil & Gas Company, a joint venture of NOC and Italian oil firm, Eni.

Mellitah invited EPC firms to prequalify for the deal at the end of January for the new system at the offshore Bahr Essalam oil field. Once Mellitah has drawn up a shortlist, it plans to tender the deal in the second quarter, with a contract award slated for early 2014. The company hopes to start up the new subsea facilities by the end of 2015.

“Apart from this, the real bid projects will only come in four or five years,” says the source. “Libya has to ability to reach produce much more by developing its existing fields and recent discoveries. There is no need to rely on finding new resources.”

Up to now, Libya has not needed to use the kind of enhanced oil recovery (EOR) techniques seen in other countries where there resources are depleting. “There has been a bit of water injection at some fields, but nothing like CO2 or chemical flooding. Whether they go for this all comes back to a strategy from NOC and the Oil Ministry,” the source adds.

How NOC itself will look over the next few years is also up for debate. In November, the newly appointed Oil Minister Abdelbari al-Arusi proposed a major reorganisation of the country’s oil and gas sector, with NOC to be split into two separate bodies to be headquartered in the capital, Tripoli, and Benghazi in the east of the country. Upstream and downstream activities would also be split. The proposal is still being considered by the government, before being sent to the 200-member GNC.