Libya's upstream appeal re-emerging on low-cost, low-carbon credentials

The North African oil producer Libya, often associated with political instability and civil war, could re-emerge as a very attractive investment destination in the coming decade.

This is because of the relatively low carbon intensity and low cost of production associated with its upstream sector, according to many international oil companies and analysts.

"If stability can be guaranteed, Libya can move ahead very quickly," said Wanis Elruemi, Deputy General manager at Eni, speaking at the Libya Energy & Economic Summit 2021 in Tripoli on Nov. 22.

Rising insecurity since the civil war in 2011 has been one of the main concerns for international oil companies.

The Libyan oil industry has been at the mercy of groups vying for control of valuable assets, with armed attacks on key pipelines and production facilities since the 2011 civil war.

Indispensable producer

Even as the energy transition starts to put pressure on upcoming oil and gas investments, countries like Libya are likely to be even more pivotal in the years to come, with many international oil companies rekindling their interest in the OPEC member.

TotalEnergies, which has recently made many investment in renewables and clean energy projects, sees Libya as a key and indispensable energy producer.

"Libya has a unique potential to be a key contributor to demand supply balance in the international oil markets in the next decade," Patrick Pouyanné, CEO of TotalEnergies, said Nov. 22.

"This country is blessed by the very large resources which can produced at the lowest cost possible, but they can also be produced by lowering greenhouse gas emissions to the strict minimum," he added, speaking at the Tripoli event.

Libya is blessed with a vast amount of oil and gas reserves, making it hard to ignore. Proven oil reserves in Libya are the largest in Africa, at over 40 billion barrels, according to industry estimates.

Given the low carbon intensity on top and Libya could become a more attractive destination for many of the largest oil companies.

Decarbonization focus

The carbon intensity of Libya's upstream sector remains below some of its competitors, and this could be further reduced with the help of solar energy and by using natural gas to power its industries, according to many oil company officials.

"The good news in Libya is that carbon intensity is already quite low," said Laurent Vivier, a senior official from TotalEnergies' Middle East and North Africa division.

Vivier said the carbon intensity of the French company's assets in Libya are around 10 kg of CO2 equivalent (CO2e) per barrel, which is very low compared to the industry standards.

In late-July, Pouyanne had said the average carbon intensity of TotalEnergies' entire oil portfolio was around 20 kg CO2e/b.

Dag Sanner, the senior vice president of Equinor's African operations, said the carbon intensity of Libya's oil operation could be further lowered by more cooperation between the international oil companies.

In late-September, the Oil and Gas Climate Initiative -- a group of 12 of the world's biggest oil and gas majors -- updated targets for reducing the carbon emission intensity of their upstream operations to 17 kg CO2e per barrel of oil equivalent. The collective methane and carbon intensity of upstream oil and gas operations was 0.23% and 21.1 kg CO2e per barrel of oil equivalent, respectively, in 2019, according to the OGCI.

Many oil and gas companies are already looking to cut their carbon footprint by indulging in many strategies, such as reducing flaring, shifting to less carbon intensive production, creating more low carbons fuels, investing in carbon offsets, adding carbon capture, among other avenues, to stay viable.

On Nov 22, TotalEnergies signed agreements with the Libyan authorities to develop solar projects and to invest in projects reducing gas flaring in oil fields in order to supply gas to power plants.

A Memorandum of Understanding was signed between TotalEnergies and the General Electricity Company of Libya for the development of 500 MW solar photovoltaic project. The French energy company is also involved in developing a GAS gathering project in the North Gialo field development to reduce flaring and supply power plants in the region and by using solar energy to power Waha's industrial facilities.

Volatility ahead of elections

Libyan crude production has been hovering near 1.2 million b/d in 2021, close to highs last seen seven years ago yet still below the heady heights of around 1.6 million b/d reached over a decade ago.

But disruption risks and sporadic shutdowns are still likely to persist with more volatility predicted ahead of the Dec. 24 elections, according to S&P Global Platts Analytics.

"A power struggle between eastern factions and those aligned with the interim government in Tripoli appears possible after Dec. 24 elections," it said in a recent note.

The recovery has gathered pace in the 12 six months, bolstered by the formation of the interim Government of National Unity, ending years of a civil conflict between the Government of National Accord and the self-styled Libyan National Army.

A large part of Libya's aging infrastructure has been wrecked by civil war, militant and terrorist attacks, and ensuing general neglect over the past decade.