Few international oil companies chose to bid in Tripoli’s first gas round on 9 December, with those that decided not to saying the terms were not commensurate with the prospects on offer. Only a third of the 35 companies shortlisted submitted a bid. Half of the 12 areas on offer received no interest, and a further two attracted just one bidder. No bids were received for any of the five offshore areas.
“Libya’s oil exploration rounds have been attracting less and less interest, but this one has really seen a breakdown [of the system],” says Kurt Wagner, Libya country manager at Austria’s OMV, one of the companies that bought the tender documents but chose not to bid.
“The acreage on offer was not of sufficient quality to justify the terms. They wanted a high exploration commitment, but were offering quite low primary split [production share] values.”
Five of the six companies that successfully bid for the acreage have existing blocks in the same area, underlining the lack of viability of the blocks for companies without other acreage to supplement their prospects.
“The lack of bids was probably due to the lack of exploration success to date and the realisation of the difficulty of bringing to market any gas that is found,” says an executive from one of the successful bidders.
Shell’s bid dovetails perfectly with its exploration in the Sirte basin, where seismic work is all but complete. “There is very little gas export infrastructure in Libya and it is all at capacity,” says Wagner. “You would need huge reserves to make it viable.”
Achieving viable production from the offshore acreage is particularly difficult. “In previous rounds, companies were given a production share of 30-40 per cent, but this time they were only being offered 20 per cent,” says Wagner.
In May, BP won a $1.3bn exploration deal for offshore acreage, but chose not to bid for additional acreage. “The water depth rapidly increases beyond our acreage,” says Toufic Nassif, vice-president of BP Libya. “And there is not enough data available to determine the prospectivity.”
State-owned National Oil Corporation (NOC) will confirm the award of acreage to Occidental and RWE, despite them being the only bidders for their blocks.
The corporation has yet to decide whether to retender those blocks that did not attract bids. “We hope that NOC now realises that they cannot impose high commitments and offer a low production share,” says Wagner.
The corporation was unavailable for comment.
TABLE: Winners of the gas acreage
|Area/ block/ winner||Maximum production share; production share bid (%)||Minimum well commitment; incremental wells bid||Minimum 2D seismic commitment; incremental 2D seismic bid (kms)||Minimum 3D seismic commitment; incremental 3D seismic bid (sq kms)||Minimum bid bonus; incremental bonus ($m)||Total points|
|Sonatrach/ Oil India||13||5||2,000||600||0||2,270|