Libya's National Oil Corp. is wooing international oil companies to its investment-thirsty energy sector with a new strategic plan now that output has stabilized, but lingering political and security woes may stymie its mandate to resurrect the country's pre-2011 oil boom.
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In February, NOC announced it had hired US consultancy Kearney to help develop "a new strategic plan" and created a Strategic Programs Office that will be responsible for implementing this plan to help the company "keep pace with developments in this sector worldwide."
The office and new strategy will help NOC carry out a ramp-up of Libya's production capacity to 2 million b/d in three to five years from about 1.2 million b/d now, which is "one of my core priorities for the NOC," its chairman Farhat Bengdara said in a Feb. 15 statement.
"The idea is that to draw foreign investment you need to be more transparent, and you need to enable IOCs to take a look at your books," said Iliasse Sdiqui, associate director at Whispering Bell, a risk management company covering North Africa. "This strategic program office is (set up) both to enable IOCs to be comfortable with channeling money into the east and also to satisfy the local communities in the region," he said. "The pressure for more fiscal transparency comes from the top, from the US, and from the international community."
Libya has been engulfed in several bouts of fighting between various militias since the 2011 downfall of Muammar Gaddafi. The political mayhem that ensued hit its vital oil sector, which has never been able to recover and return to producing 1.6 million b/d. Production was 1.2 million b/d of crude oil and 55,000 b/d of condensate on March 19, according to the NOC.
Libya needs foreign investment to develop its vast energy resources, including its proven oil reserves, the largest in Africa. Ever since Bengdara was appointed in July to replace long-standing chairman Mustafa Sanallah, Libya's oil and gas sector has been stable, following the lifting of force majeure on exports and production, which had hit a two-year low of 650,000 b/d of crude in June amid a blockade, according to the Platts survey by S&P Global.
"To maximize and optimize the opportunities and resource base, Libya needs a far greater pool of investors to call on and it needs to reactivate some of the contracts that have fallen by the wayside," Catherine Hunter, an analyst with S&P Global, said. "Pre-2011, there were a lot of exploration contracts, there were a lot of different companies active in Libya and then a lot of those went into force majeure and investors pulled back."
Libya, which is exempt from OPEC+ quotas, pumped 1.17 million b/d in February, with production holding steady from January, according to the latest Platts survey.
Bendgara, an ex-central bank chief during the Gaddafi era, may be the man that can help revive the pre-2011 oil boom after a political agreement was reached last year between Prime Minister Abdula Hamid Dbeibah in the UN-backed Government of National Unity and Khalifa Haftar, the head of the self-styled Libyan National Army in the east where the Government of National Stability is based.
Bengdara has been quick to embark on foreign visits, including the US, where he met with senior energy officials and executives and invited US companies to invest in Libya's energy sector.
"For certain super majors, there definitely seems to be appetite (to invest in Libya), but IOCs have different tolerances for risk and so I do not necessarily think that Libya as it stands would be a mainstream investment," S&P Global's Hunter said.
So far, European companies are the main IOCs operating in Libya's energy sector, with Italy's Eni being the biggest foreign investor.
Eni produced 198 Bcf gas in Libya in 2021 and its production is brought to Italy through the 520-km (323-mile) Green Stream pipeline, which has the capacity to carry 8 Bcm/year.
"There remains uncertainty and IOCs cannot plan in advance for more than two to three quarters max," Sdiqui said. "The ones that are looking at the NOC with a keen interest and a keen eye, they need to also adapt to this reality. They cannot just look at the positive signals - the fact that NOC invited them back, the fact that the NOC lifted force majeure etc - and think we will operate as we did pre-2011."
Eni, which has been operating in Libya since 1959, is the first IOC to announce a new project in Libya in over 20 years. In February, Eni and the NOC signed an agreement to develop offshore Structures A&E, which will produce 750 MMcf/d of natural gas by tapping estimated reserves of 6 Tcf.
However, not everyone is convinced the worst is over for Libya's oil sector.
"The fact there is no force majeure and the fact that oil production is at a high level, is good," said Jalel Harchaoui, a political analyst at Royal United Services Institute, a London-based think tank. "But apart from that, I do not think international oil companies are comfortable, do not think that we will never have a blockade under Farhat Bengdara. It is not in his hands."