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TheBusinessOnline: Libya offers global energy groups $7bn licence deal

By Danelle Wyper
03 September 2006
 
LIBYA’S state-owned National Oil Company (NOC) is to issue up to 60 new licences to international energy companies, allowing them rights to explore for oil and gas in return for a commitment to invest more than $7bn (£3.6bn, E5.45bn) over the next 10 years.

Officials from NOC met oil executives in London last week, with details of five new auctions to be held over the next three years. These are aimed at stimulating investment in exploration activity in the country.

In return for a commitment to carrying out significant exploration activity, including seismic surveys and drilling exploration wells, Tripoli is offering international companies the opportunity to enter into 30-year production sharing agreements that will give them up to a 40% share of any oil production.

The Business has learned that NOC officials have drawn up a master plan for the sector with the aim of ramping up exploration activity in the country to boost its proven oil reserves by 50%, to about 60bn barrels by 2015 – up from the 40bn barrels today.

They told executives the country is also seeking to nearly double its annual oil output over the next 15 years to about 3m barrels a day.

Libya’s oil production has been severely depleted by almost two decades of international sanctions, which were lifted in mid-2004.

Despite being home to some of the world’s biggest oil and gas reserves, production in the north African state stands at the level of about 1.7m barrels a day, half of what it was in the early 1970s.

With huge tracts of the country still unexplored, a low production cost base – estimated at about $1 a barrel – and its close proximity to energy-hungry European markets, Libya has attracted considerable interest from the world’s energy companies since the lifting of sanctions.

Tripoli is hoping it can tap into this surge in interest. Under its 10-year plan, Tripoli wants international oil companies to drill about 50 exploration wells a year between 2005 and 2015 and to conduct seismic surveys over about 14,000 square kilometres of land a year.
 
“We believe this activity will cost about $4bn over the next 10 years,” said the chairman of NOC’s upstream negotiation committee Azzem Mesalati.

He added: “But this is only for the seismic surveys and the drilling. In total, we expect international oil companies to spend more than $7bn on exploration between 2005 and 2015. This covers studies and laboratory work as well as the $4bn on exploration.”

Mesalati was in London last week for the launch of the country’s third auction of exploration licences since the lifting of sanctions.

Oil companies have until 20 December to submit bids for 14 licences on offer.

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