It is safe to say that the new Libya will not have a drastically different upstream oil and gas policy than the one pursued by the Gathafi regime. Most likely, under the new Libyan system of governance, oil and gas rights will continue to be granted through production sharing agreements. There will also be new opportunities for those companies interested in service contracts for existing oil and gas production, mainly in the area of enhanced oil recovery.

However, the international oil and gas industry will most likely notice a substantial difference in the level of transparency and openness when dealing with the various government entities, such as the National Oil Company (NOC) or the Ministry of Energy.

During the time of the Gathafi regime, the Gathafi family ran Libya, and especially the state’s oil and gas apparatus, like it was its own personal property. This included terrorizing mid-level and senior NOC management into submission to the whims and desires of the Gathafi family. Business, economic or commercial considerations hardly played a role in the Gathafi decision-making process. Everything was decided on a political basis, mostly for expanding Gathafi’s control. As such, most of these mid-level and senior NOC managers were unable to interact with the foreign oil and gas companies in a reasonable and transparent manner, for fear of reprisal from Gathafi’s enforcers. Of course, the relationship with the international oil and gas companies suffered tremendously from this un-natural dynamic. It was very frustrating for many foreign oil and gas company managers to deal with these scared and corrupt bureaucrats. In many cases, it was outright impossible to conduct normal, everyday business in Gathafi’s Libya.

Many of those who make up the leadership of the new Libya were intimidated into making many wrong decisions to satisfy the Gathafi family agenda. They had seen firsthand the consequences of running the oil and gas business as the personal property of the Gathafi family. It is reasonable to assume that the new leadership will function much more transparently, especially when it comes to Libya’s major source of income – oil and gas.

It is important to understand the ideals of the Libyan revolution, when considering the future of the oil and gas business in Libya. One of the main goals of the anti-Gathafi revolution was, and still is, to strive to rectify all the damage that the Gathafi regime created, which includes the mismanagement of the oil and gas wealth and the related organizations.

Moreover, when trying to predict the future of the foreign oil and gas community in Libya, we must also bear in mind the education and experience level of management of the NOC and other related governmental entities. Many of these professionals studied in the US and Europe. Many were also employees of international oil and gas companies, making them fairly aware of the needs and limitations of the international oil and gas community. Given the nature of the new order in Libya, it should not come as a surprise that these professionals will be much more transparent and accommodating. They are no longer functioning under the tyranny of one man and his family.

Most of the new Libyan leadership is made up of people who have a friendly disposition toward the West, and foreign investment in general. They are very thankful to the West for helping bring about the demise of the Gathafi regime.

On the other hand, although the Gathafi regime appeared to be friendly during its last several years in power, it was actually quite suspicious of the West, and foreign investment. It knew that it had to make fundamental reforms to attract and keep desperately-needed foreign investment, which meant giving up some control. This was not something desirable for a regime that believed it could maintain power only by ruling with an iron fist.

In addition to the abovementioned post-Gathafi oil and gas business improvements, Libya has for a long time offered very competitive production sharing agreements, and more than adequate oil and gas infrastructure for expediently monetizing any oil or gas discoveries.

In the event of a natural gas discovery, Libya offers a more than adequate domestic natural gas market that is steadily growing, with excess natural gas pipeline capacity. It also offers natural gas export opportunities, as Libya enjoys the benefits of an LNG production plant and export terminal, as well as an export natural gas pipeline to Italy. The current Libyan energy authority is more open to accommodating the oil and gas companies with favorable natural gas sales/purchase agreements. Libya enjoys a very positive cash flow, and can afford to fully pay its natural gas suppliers in a timely manner.

The existence of world class oil and gas infrastructure offers the oil and gas investor in Libya a more cost-effective environment. Currently, and in the foreseeable future, there would be no need for any major infrastructure investment on the part of the foreign oil and gas companies. Most hydrocarbon-rich areas of the world, outside the industrialized world, do not even come close to offering this kind of oil and gas investment environment.

Although it is true that some of the infrastructure was damaged during the civil war, it does not amount to more than 10% of the entire oil and gas infrastructure. Furthermore, Libya has the ability to quickly make the necessary repairs to function normally. In fact, Libya’s crude oil production has now reached 600,000 b/d from less than 100,000 b/d, during the height of the civil war in the summer of 2011. The country plans to increase its crude oil production to around 1.7 million b/d before the end of 2012, which is the pre-civil war level of production.

Some have warned that Libya still faces the serious challenge of political (and sometimes tribal) fragmentation to be considered a truly viable investment climate. Those who make such statements do not truly know Libya and Libyans. There are many “experts” who have no knowledge of Libya’s history, culture, and the tribal/clan and family dynamics. Therefore, it is not difficult to arrive at the wrong conclusions.

In Libya, the only people who could have caused the country’s disintegration were the Gathafis and their supporters. Their ability to cause major strife between the different political or tribal factions has been entirely eliminated, and they are no longer a threat to the new Libya.

Once in a while, we hear news about clashes between different factions that appear as tribal rivalries. However, they are clashes that almost always stem from some residual effects of Gathafi’s 42-year rule. These residual effects will not disappear overnight, but they are not a threat to the general well-being and stability of the new Libya.

With the total defeat of the Gathafis and their supporters, Libya is no more a fragmented society than any stable country with different political factions competing for power, like in many Western democracies. This political reality will have no major effect on the oil and gas investment climate, much like it has no major effect on the operations in the North Sea or the Alaskan North Slope.

Let us not forget that the foreign oil and gas community has been operating reasonably well in Algeria, which is a country that has been plagued by a civil war and political violence since 1992. Libya’s political challenges are not even close to being as acute as Algeria’s.

Therefore, if there is no significant interference from foreign powers, like in Iraq or Afghanistan, there is good reason to believe that the new Libya will be one of the better places to do business for the international oil and gas industry, perhaps even better than the North Sea and the Alaskan North Slope, or even the Gulf of Mexico.

Source: www.middle-east-online.com

Stephen Green said that a number of British businessmen took part in his meetings with Libya’s new leaders and established businessmen to begin discussing future deals and contracts.

He said that he did not expect Libya to give the U.K. better bidding options or business advantages.

“They (Libyans) are appreciative of the role the UK played, but do we have better options? No,” Green said.

Energy giants Shell and British Petroleum, as well as oil and gas consultancy firm AMEC were among the businesses that accompanied the trade minister for talks in Libya.

Libya’s economic future could hinge on the performance of its lucrative oil and gas sectors, of which production was ground to a near standstill during the past six months of civil war.

Libya sits atop Africa’s largest proven reserves of conventional crude, raking in $40 billion in revenue last year from oil and gas exports. Still, experts say it could take more than a year to get Libya back to its prewar production rate of 1.6 million barrels per day.

Green said that while it’s not too early to talk business in Libya, no contracts will be signed until an elected government is in place.

“No strategic decisions will be made until there is a proper constitution and a legal government,” Green said.

Source: www.washingtonpost.com

Abdeljalil Mohamed Mayuf said that the Arab Gulf Oil Co., responsible for more than a quarter of Libya’s former production of 1.6 million barrels a day, stopped pumping for fear of further attacks by the forces of embattled leader Moammar Gadhafi.

“Everything depends on security. We can produce tomorrow but our fields would be attacked,” Mayuf said in an interview. “We cannot put an army around each field. We are not a military company and the forces of Gadhafi are everywhere.”

He said they were within 40 kilometres of the southeast fields at Messla and Sarir.

“We cannot say when we will restart because it depends on this military operation and when Gadhafi leaves.”

He said the decision was made after rocket attacks April 4 seriously damaged a pumping station and production facilities at southeast Messla oilfield, followed, a few days later, by hits on a pumping station halfway along the 317-mile (510-kilometre) pipeline from Messla to Tobruk port. Eight rebels serving as guards were killed in the second attack, he said.

Gadhafi struck after the rebels had just begun exporting oil, following a weekslong hiatus due to fighting. The rebels had sold 1 million barrels of oil with the help of Qatar. The exports were intended to raise funds to battle the leader of 42 years, who still controls the western half of the country.

After the attacks, rebel oil chief Wahid Bugaighis said repairs to Messla would be completed in about three weeks and they would resume pumping oil.

Mayuf said Bugaighis “doesn’t know what he is talking about.”

Bugaighis told the AP on Saturday that he no longer has authority in the rebels’ civilian National Transitional Council. His resignation apparently followed differences with Agoco. The council announced an expanded temporary Cabinet on Friday but did not name a replacement for Bugaighis.

Though it is outside his portfolio, Mayuf castigated countries that rebel officials consider to be supporting Gadhafi, in part because of votes on Libya in the Security Council. “Countries like Russia, China, India, and Brazil also has a strange position, these people should be concerned about their interests in Libya, concerned about what will happen when all Libya is free of Gadhafi,” Mayuf said. China Oil, Oil India, Russia’s Gazprom and Brazil’s Petrobas all have investments in Libya.

Some 80 per cent of Libya’s oil fields and facilities are in the east of the country that has come under rebel control in the three months since citizens of the northeast port of Benghazi started the revolt against Gadhafi.

Mayuf said most oilfields in west Libya were run by Western companies who evacuated from Libya weeks ago, with production at the main western Hamada fields halting from the start of the revolt. He said the western refinery at Ras Lanouf operated with Agoco oil, so could not be productive until Agoco resumes work. Agoco provided about 15 per cent of fuel for a smaller refinery at Zawiya, just east of Tripoli, he said.

Agoco, which is the biggest company operating in Libya in terms of production and the size of reserves in its oil fields, has retained skeletal staffs at all its facilities but only for maintenance of equipment, Mayuf said.

The company produced 425,000 barrels a day before the uprising, and afterward dropped to 130,000 a day.

Mayuf said Libyan oil executives long have been suspicious of the official production figure of 1.6 million barrels daily put out by Gadhafi’s regime. “They’ve been using that figure for the past three years, but we know production has gone up and many of us suspect it was nearer 2 million (barrels) a day,” he said.

He speculated the extra 300,000 to 400,000 barrels of Libyan sweet was sold on the spot market to benefit Gadhafi and a small elite clique. There was no way to verify Mayuf’s speculation.

Libya produces only a fraction of world production, with most exported to Europe, but fears of similar uprisings spreading to other oil-producing Arab nations has caused world oil prices to soar.

Libya has the largest proven oil reserves in Africa, an estimated 46.4 billion barrels as of January 2011, according to Oil and Gas Journal.

Amid gas shortages and long queues, the rebel National Transitional Council issued a statement Saturday urging citizens to conserve gas, to ensure fuel supplies in all of liberated Libya, especially the besieged port of Misrata, where rockets set the main fuel supply depot ablaze last week.

Source: www.google.com

En Trípoli, Sócrates se reunirá con el líder libio Muammar Gaddafi y con el secretario general del Comité Popular General al Baghdadi al-Mahmudi. Se espera que durante las pláticas se exploren distintos medios para equilibrar el balance comercial entre ambos lados, el cual está a favor de Libia, uno de los principales abastecedores de petróleo de Portugal, por 296,8 millones de euros.

El ministro de Economía portugués José Vieira da Silva dijo que las reuniones de Sócrates se enfocarán en promover las relaciones dentro de las industrias de energía, infraestructura, agricultura y alimentos.

Da Silva, quien acompaña al primer ministro portugués, dijo que la gira pretende ampliar las relaciones comerciales existentes con Argelia y Túnez, promover las relaciones de vecindad con Marruecos y traer más compañías portuguesas a Libia.

El lunes Sócrates partirá hacia Argelia donde se reunirá con el presidente Abdelaziz Bouteflika y participará en un seminario sobre energía renovable.

La corporación estatal argelina de petróleo y gas, Sonatrach, y la principal compañía portuguesa de petróleo y gas natural, Galp Energia, tienen un acuerdo bajo el cual el 61 por ciento del gas natural de Galp proviene de Sonatrach a través de tuberías que transportan el gas natural. Argelia también es uno de los principales abastecedores de petróleo de Portugal.(Xinhua)

More than two-dozen companies from around the world are betting on Libya these days, said Ronald Bruce St. John, an analyst for Foreign Policy in Focus, a Washington-based think tank. He has served on the international advisory board of the Journal of Libyan Studies and the Atlantic Council Working Group on Libya. The government of Muammar Qaddafi has relied on foreigners to scout for new wells and bolster current production, “if they’re ever going to come close” to a target of three million barrels a day, he explained.

The burning question, though, is “how profitable would it be” for an overseas oil concern to forge ahead in the country’s hit-or-miss exploration climate, a situation made even more dicey by Tripoli’s erratic policy moves, St. John told OilPrice.com. Libya’s national oil company chief has talked about the need for foreign investment over the last few years, he noted, but this time Ghanem’s words follow months of government bungling and less-than-stunning results in the oil and gas fields.

One of last year’s biggest shocks was Qaddafi’s suggestion to nationalize the country’s oil and gas interests, a consideration that seemed to echo the early days of the Libyan revolution when the industry was partially nationalized. These words set the stage for the National Oil Corp. to renegotiate long-term contracts in Libya’s favor with major oil companies operating in the country, such as Italy’s ENI, the United States’ Occidental, PetroCanada, France’s Total and Spain’s Repsol, St. John added.

International investors were also a little unnerved by the Verenex Energy Inc. fiasco, St. John added. He said the small Canadian oil exploration player was the only company to make a sizeable discovery – more than two billion barrels of oil – under strict EPSA, phase four, contracts awarded after 2005.

But Libya’s interference in negotiations between Verenex and the China National Petroleum Co. over the sale of the Canadian firm’s exploration contract drove down Verenex’s share price by 30 percent and forced it to sell the contract to Libya at 70 percent of the original offer to China, he said.

Dampening enthusiasm still more, no company under these 2005 agreements has scored big in oil apart from Verenex, St John maintained.

So where does this all leave Libya and its nervous investors today?

Ghanem’s latest declarations are obviously attempts to “put a positive face on an industry that has not been going well in the last 12 to 18 months,” St. John said, adding that these events have prompted “great uncertainty” in the oil and gas industry, and “a lot of that’s their own fault.”

The oil chief is a little anxious that international companies potentially stumbling across petroleum finds may one day “cap the wells,” while unsuccessful players will pull out entirely, St. John said.

And now, a sector which has been “relatively efficient and transparent” is following other parts of the Libyan economy that so far have rejected reforms, he warned, saying the oil industry seems to have fallen prey to conservative factions within the government coveting more control.

The Qaddafi government is arguably on an uneasy footing as it makes a play for more international money, noted Simon Henderson, a Baker fellow and director of the Gulf and energy policy program at the Washington Institute for Near East Policy.

Within the Libyan government there is resistance to encouraging more foreign investment in the oil market, but Ghanem’s argument is the country cannot go it alone, said Henderson. The North African country sorely needs foreign investors but wants them to view such requests as a partnership rather than as an invitation to take over sectors of the economy, he explained.

“The difficult challenge is at home, Arab nationalism is a very strong thing,” Henderson told OilPrice.com “Foreign investors are seen as diminishing Arab nationalism and therefore are resisted ideologically. And from a foreign investor’s point of view, selling the notion to your shareholders that you can get a good agreement with an apparent eccentric like Col. Qaddafi is questionable.”

For the most part, larger companies will probably “soldier on,” predicted St. John, but smaller companies will be more careful about “how much, and how fast” they invest in Libya – especially if there’s a better game in town.

Source: www.arabnews.com