Work progressing

Libya Poised for Production Success

Even before passage of the recent U.S. energy policy legislation – which omits any effort to increase domestic oil and gas production – many U.S.-based companies already had set their sights on conducting a significant part of their operations in other, more E&P-friendly countries.

A notable case is Libya, where the action is heating up following the lifting of economic sanctions imposed by the United States in 1986 that placed it off limits to investments by U.S. companies.

Given Libya’s vast, largely unexplored areas, it’s viewed as one of the most appealing exploration regions on the international scene.

In fact, it harbors an estimated 36 billion barrels of high quality oil reserves, according to the Energy Information Administration. Relatively low production costs and geographic proximity to Western markets add to the appeal of doing business there.

ExxonMobil is among the big companies with big plans for Libya.

In a way, this is a kind of homecoming.

Prior to the merger of Exxon and Mobil, the two separate entities had been among the earliest companies, along with Oxy, to enter Libya back in the 1960s. When they both chose to exit the country prior to the sanctions, the joint production between the two was more than one million barrels of oil per day, according to Russ Bellis, exploration director at ExxonMobil International.

“With our re-entry in 2005, our objectives have not changed from what they were originally, which is to build a material presence and work with the Libyan National Oil Corporation (NOC) to fully exploit, find and further develop hydrocarbon resources in Libya,” Bellis said. “It’s a simple broad-based strategy.”

A Five-Year Commitment

The company’s most recent effort entailed negotiating a Heads of Agreement to execute an Exploration and Production Sharing Agreement with the Libyan NOC for Contract Area 21 about 110 miles offshore in the Sirte Basin, which reportedly is a world class petroleum province.

Contract Area 21 sits in water depths ranging from 5,400 feet to 8,700 feet, and the untested block is thought to be a particular prize in that it’s considered to be among the most prospective unlicensed areas in the Libyan offshore.

As part of the agreement, Bellis confirmed they committed to a five-year work program, which will entail:

  • At least 4,000 kilometers of 2-D seismic acquisition.
  • 2,000 square-kilometers of 3-D seismic.
  • One deepwater exploration well.
  • Implementation by the company of a training program aimed at upgrading the skills of the nationals.
  • Provide other support for education in Libya.

The actual EPSA is in the process of being worked out.

Meanwhile, the company is busy in other areas.

“We have two EPSAs in place today,” Bellis said, “which we won in exploration rounds.

“In Round 2 in 2005, we were awarded Contract Area 44 off the northeast coast,” he noted. “We’ve already completed recording more than 5,000 kilometers of 2-D seismic data there that’s now being interpreted.

“In 2007, we participated in Round 3 and were awarded Contract Area 20 (immediately west and adjoining 21) in the offshore Sirte Basin, effectively northeast of Tripoli,” he said. “In that contract area, we’re currently recording 2-D seismic, and will likely acquire 3-D there next year.”

Additionally, the company presently is implementing CSEM (controlled source electro-magnetic) mapping in area 44 and plans to apply this same technology in area 20.

Oxy’s Big Presence

Oxy, another prominent player in Libya, reportedly has a position tallying about 30 million acres, making it the country’s largest holder of oil and gas acreage.

The company first began operations in Libya in 1965.

Unlike ExxonMobil, which had no standstill agreements to allow it to re-enter assets previously held, Oxy re-entered its historical producing areas in 2005 where it’s applying new technology and EOR methodology to enhance recovery.

In fact, Oxy has signed agreements with the Libyan NOC to upgrade several of its existing petroleum contracts to be more in line with the contractual framework now in place relative to the country’s petroleum industry.

Following a $5 billion capital investment over a five-year period, the fields included in the agreements are anticipated to kick out more than 300,000 barrels a day compared to current levels of 100,000 barrels.

Following an almost-20-year lockout, you may be curious as to whether all parties must tread lightly.

In fact, there appears to be a notable lack of intimidation.

“By our participation in the country, we’ve acknowledged there is an acceptable working relationship with the Libyan government,” Bellis said. “The government has strived for a very transparent process in terms of how acreage is awarded.

“They work hard to make it as transparent as they can.”

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