Libya's state-owned National Oil Corp. and Eni will sign a production agreement to spend $8 billion to produce about 850 MMcf/d from two offshore gas fields in the Mediterranean Sea, the company's chairman said Jan. 23.
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NOC and Eni, who will sign the agreement on Jan. 28, will develop the two fields that were already explored according to a 2008 deal and were supposed to start production between 2017-2018, Farhat Bengdara told Libya's Al-Masar TV.
"We expect investments to be more than $8 billion" due to cost inflation, Bengdara said.
Eni couldn't be immediately reached for comment.
Eni already produces gas in Libya from its Wafa and Bahr Essalam fields operated by Mellitah Oil & Gas, a joint venture between the Italian company and NOC.
Gas from the fields is brought to Italy through the 520-km (323-mile) Green Stream pipeline that crosses the Mediterranean Sea to Gela in Sicily and has the capacity to carry 8 billion cu m/year. Eni produced 198 Bcf of gas in Libya in 2021, according to its website.
Italy is trying to diversify its sources of gas following the reduction of Russia supplies to Europe in the wake of Moscow's invasion of Ukraine on Feb. 24.
Under a government target to eliminate Russian gas by 2025, Italy is working on a number of short- and mid-term measures to boost LNG and pipeline flows from other sources.
Libya is trying to woo back international oil companies to explore for gas and oil, particularly offshore, after lifting in December a force majeure on exploration and production agreements.
Russian oil company Tatneft recently resumed upstream work in the Ghadames Basin. NOC is now hoping to court more international oil companies like BP, Eni, TotalEnergies, ConocoPhillips, OMV and Repsol to resume upstream work in the country.
Libya is desperate to expand the presence of international oil companies as its recent production recovery has been stymied by a lack of funds and aging infrastructure.
Currently, Libya is trying to maintain gas producing at 1.5 Bcf/d, with about 850-900 MMcf/d used locally for electricity production, 250 MMcfd/ exported and the remainder consumed mainly in industry.
Lower gas exports to Italy
"We reduced exports to Italy, and we preferred to send gas for electricity production," Bengdara said, without disclosing volumes and timeline for cuts of gas supply to Italy.
Libyan gas flows to Italy will be significantly reduced due to unscheduled maintenance at the Mellitah Complex, Eni North Africa said via Italy's Energy Market Manager on Jan. 5.
Libya also wants to woo foreign investments to help lift oil and condensate production from 1.255 million b/d now to around 2 million b/d in three to five years, Bengdara said.
"Oil production has stabilized, and we are producing acceptable levels," Bengdara said.
"The problem [for future development] is with stability and the ability to attract foreign investments. We do not have the financial resources to invest in these sectors in a big way."
Libya's production has steadily increased since the summer when political fighting worsened with continued bickering between the UN-backed Government of National Unity and the eastern authorities -- the Government of National Stability and the self-styled Libyan National Army, led by Khalifa Haftar.
Libya, which does not have an OPEC quota, pumped 1.17 million b/d in December, according to the latest Platts survey by S&P Global Commodity Insights.
Libya needs to restore its credibility to woo investors, particularly to explore and develop offshore reserves, where drilling one offshore exploration well costs between $150 million-$200 million, Bengdara said.
"We suffer from political tensions," he added.
Libya has been wracked by political instability, with governments in the west and east vying for control of the country and its lifeblood oil industry. Key oil ports and production fields have seen their operations intermittently disrupted by civil unrest, prompting NOC to declare force majeure on exports for several months in 2022.
A large part of Libya's aging infrastructure has been wrecked by civil war, militant and terrorist attacks, and general neglect over the past decade.
Libya exports mainly light sweet crude grades such as Brega, Es Sider and Sharara. Its main export markets are in southern Europe and China.