Tapping Libya’s Oil, Gas Potential North African Nation’s Energy Outlook Among Best in World Why is the world so interested in Libya? Here’s the short answer: The Great Socialist People’s Libyan Arab Jamahiriya—as it’s officially known—is Africa’s second-largest oil producer after Nigeria, with proven petroleum reserves of 36 billion barrels. That’s nearly 3 percent of the world’s total. But because only one-fourth of the vast North African country has been explored for oil and gas deposits, there may well be another 50 billion to 100 billion barrels underneath the Libyan desert waiting to be discovered. “Libya is one of the world’s two great undeveloped oil frontiers. The other one is Iraq,” said David Goldwyn, executive director of the US-Libya Business Association. “Libya is a low geological risk, it’s politically stable, it’s close to the European market, and they’ve been hugely successful with their international tenders.” The country’s development target is to boost oil production from the current 1.6 million barrels per day to 3.5 million barrels per day by 2020, the equivalent production rate in the 1970s. At the same time, it hopes to increase reserves to 20 billion barrels of oil equivalent. To achieve this, Libya’s state-run National Oil Co. (NOC) is targeting a minimum of 50 wildcat wells drilled per year (wildcat refers to wells drilled speculatively in an area not yet known to be productive). “Under the circumstances, drilling and oilfield equipment shipments to Libya are multiplying,” said the National US-Arab Chamber of Commerce, noting that U.S. exports will pass the $500 million mark in 2007 and satisfy 5 percent of Libya’s overall import demand. Total investment by international oil companies is expected to reach $7 billion. To date, the single largest foreign investor in Libya’s oil sector is BP, formerly British Petroleum. On May 29, BP and its local partner, the Libya Investment Corp., concluded a $900 million exploration and production agreement with NOC. Under the accord—signed in the Libyan city of Sirt by BP Chief Executive Tony Hayward and NOC Chairman Shokri Ghanem—BP will explore around 54,000 square kilometers of the onshore Ghadames and offshore frontier Sirt basins. Successful exploration could lead to the drilling of around 20 appraisal wells. For comparison’s sake, the North Ghadames block alone is the size of Kuwait, while the offshore Sirt basin is the size of Belgium. In total, the acreage is more than 10 times the size of BP-operated Block 31 in Angola, where BP has announced 14 discoveries so far, or more than 2,000 Gulf of Mexico deepwater blocks. “For BP, this is a welcome return to Libya after more than 30 years and represents a significant opportunity for both BP and Libya to deliver our long-term growth aspirations,” Hayward said. “With its potentially large resources of gas, favorable geographic location and improving investment climate, Libya has an enormous opportunity to be a source of cleaner energy for the world.” The agreement also calls for BP to spend $50 million on education and training projects for Libyan professionals during the exploration and appraisal period, and, upon success, another $50 million from commencement of production. The education and training programs will be designed and managed in partnership with NOC, which also seeks investments of $3.5 billion to increase petrochemical production, including polypropylene, benzene and polyethylene. That’s where Dow Chemical Co. comes in. In mid-April, Dow and NOC announced they would form a joint venture to operate and expand the Ras Lanuf petrochemical complex along Libya’s Mediterranean coastline. No dollar figure has been put on the venture because it doesn’t formally exist just yet. “We have signed the heads of agreements, which is the first step toward forming a joint venture to go forward with the project. The next step would be to actually sign the agreement,” Dow spokesman Chris Huntley told The Washington Diplomat from the company’s headquarters in Midland, Mich. As such, Dow is the first global chemical company to participate in the development of Libya’s petrochemical sector. The venture encompasses Ras Lanuf’s existing naphtha cracker, two polyethylene production facilities and associated infrastructure. “Right now, there is a facility on site that produces polyethylene,” Huntley explained. “The first phase would be focused on overhauling that, refurbishing it, basically providing our expertise as the world’s largest polyethylene producer to get that up to a better state in terms of its operation and capacity.” Huntley said that long years of sanctions had taken their toll on Ras Lanuf, which is badly in need of an upgrade. “The fact is that we are now investing in Libya with the full support of the U.S. Department of State and the Commerce Department. They’ve been encouraging investment in Libya because they see this as an opportunity to participate in the country’s economic revitalization.” He added that “the facility is strategically located on the Mediterranean, where it has excellent access into Southern Europe and low-cost feedstocks. From Dow’s perspective, it makes absolute sense to be there.”

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