Global Insight Perspective | |
Significance | Libya's National Oil Corp. (NOC) already has three largely successful bidding rounds under its belt, but this will be the first with a clear gas focus, an area in which Libya has long been active but lacks much of the technological proficiency it will now try to woo. |
Implications | The ability to get quick results and the financial muscle to commence rapid development will be important features in any bidders. Nevertheless, technology transfer will also figure highly among the selection criteria, as will a developed access to markets. |
Outlook | Libya is keen that this round, together with the recent bilateral E&P deal with BP, becomes a decisive push—similar to Egypt's gas development programme at the beginning of the decade—lifting Libya to become one of the main suppliers of gas to Europe and in the end a major player in the world's LNG arena. |
Launching Gas
Having suffered a lack of technology and investment during the long period of international sanctions that finally ended in 2003, Libya has invited IOCs to develop its oil riches three times already. The investments have served the country well, underpinning production levels and also bringing in new enhanced oil recovery (EOR) techniques for the country's maturing fields. This crucial investment, modernising its oil industry, has now resulted in Libya's National Oil Corporation (NOC) having the ability to focus exclusively on gas exploration and development for a while, inviting international companies to invest in the gas sector and get its ambitious gas development plans going.
Public Bid Round IV | |||
Basin | Area | Blocks | Acreage |
Offshore | 3 | 1, 2, 3, 4 | 5,742 |
15-16 | 2, 4-1, 2, 3 | 2,792 | |
22 | 1, 2, 3, 4 | 10,303 | |
23 | 1, 2, 3, 4 | 10,301 | |
71 | 2, 3, 4 | 4,730 | |
Sirte | 89 | 1, 3 | 1,790 |
103 | 1, 2, 3, 4 | 4,986 | |
Ghadames | 64 | 1, 2, 3 | 3,936 |
96-96 | 2-1, 2, 4 | 6,934 | |
Murzuq | 113 | 1, 2 | 5,494 |
114 | 1, 3 | 10,289 | |
Cyrenaica | 58 | 1, 2, 3, 4 | 10,289 |
Libya's gas drive comes at a very favourable time, as Europe is scrambling to diversify its gas imports, which are currently heavily dependent on Russia and Algeria. Libya wants to reach quick results through a dedicated development programme, in order to build up its gas export capacity in a short space of time, similar to the gas push Egypt made in the early 2000s. The large and diversified investments and developments IOCs have made in Libya's oil sector during the last few years will pay for NOC's share of that drive, and Libya has already developed a gas export channel to Europe in the form of its pipeline to Italy.
All Bids are On
The NOC's Public Bid Round IV encompasses gas prone tracts in Libya's offshore west-coast and Sirte basins, as well as onshore tracts in Ghadames, Murzuq and Cyrenaica. The offshore areas are both in the shallower parts of the shelf and in deepwater blocks. While initially most of the blocks are in relative proximity to some of the most hydrocarbon-prone tracts of the country, there will definitely be major differences between the blocks, even within the areas. For example, Cyrenaica's Area 58 will initially show a bit less promise than Areas 64 and 95-96 in Ghadames, near to where some of Libya's biggest producing fields have been found. Tracts in the Gulf of Sirte will most probably also pull a large crowd of bidders as will the shallow offshore westcoast Area 15-16, situated not far from the fields producing some of the Western Desert Gas Project's gas.
Time-Frame
Steps in the Bidding Process |
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The initial presentation in Tripoli, Libya, will be held on 8 August, with a second -and possibly last chance to receive information about the round being held in London, United Kingdom, on 15 August, at a venue yet to be decided. Bids for the pre-qualification process are to be submitted before 22 August, as the NOC has committed to end the pre-qualification process no later than 30 August. Click here to see NOC licensing round documents. Pre-qualified companies will have an opportunity to evaluate existing data between 9 and 23 September, with final exploration and production-sharing agreements (EPSAs) being dispatched to the companies on 22 October. Final bids from the pre-qualified IOCs should be submitted by hand at 1000 local time on 9 December and will be opened, with the winner announced, later that same day.
Outlook and Implications
Libya has built up experience in running licensing rounds, with this round being the fourth such process. Not everything has gone totally smoothly, however, as the last oil exploration round pulled in a much smaller crowd than originally anticipated, due to NOC being overly optimistic about how small shares it could give and how high signature bonuses it could receive for smaller frontier areas (see Libya: 22 December 2006:Time for a New Record? Third Libyan Round Pulls in Small Crowd). Those lessons should have been learned, and this round should certainly be expected to be run on a more realistic basis.
That is not to say that there are no grounds for NOC to be optimistic, as Libya's gas potential by all accounts is seen as very promising, and indeed this is the first round targeting gas, and as such it could not be considered to be offering mere left-over scraps from the table. Libya has already established a gas export channel to Europe and has voiced plans for a ambitious LNG development programme, details of which we should expect to hear more of during this licensing round.
However, even though Libya was early in acquiring LNG capacity, with its Mersa el Brega liquefaction terminal being among the oldest in the world, NOC is far behind on gas production and transportation technologies. This suggests that technology transfers will play a decisive role in any successful bid, as was recently demonstrated in the bilateral BP deal, where the U.K. supermajor committed to a large scaled education programme targeting NOC personnel (see Libya: 30 May 2007: BP Announces US$900-mil. Gas Exploration Comeback to Libya and Libya: 31 May 2007: Further Plans and Details Emerge from BP's Libya Deal).
Libya might still be viewed by many as a country just emerging from darkness, learning the ropes and therefore offering excellent conditions for the early-bird prospector. It is true that Libya can and will offer some of the best exploration opportunities currently accessible in the world. However, the NOC—its somewhat lower technological proficiency aside—is no novice when it comes to running licensing rounds, and bidders should expect tough bargaining and conditions reminiscent of more developed areas. Libya does not suffer from political instability and the regime, as well as the legislation, appears safe. Too-low bids, by international standards, will not be tolerated, and the NOC would rather refrain from awarding a tract than feel it had been given away too cheaply.
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