Libya is taking steps to attract more foreign investment in its oil industry and the response has been impressive.
So, what's the attraction? Oil -- and lots of it.
Libya already has several giant fields to its credit -- one discovered just two years ago -- and, more importantly for the future, large areas that are only lightly explored. That combination translates to a magnet that draws international companies.
In April Libyan officials held an oil and gas investments conference in Geneva to discuss proposed changes to the country's 40-year-old petroleum law and to outline the government's preferred method for attracting new investment in exploration and production, according to the IHS Energy Group's International Oil Letter.
Libyan Oil Minister Abdalla S. El-Badri confirmed at the conference that a review of the legal framework covering foreign investment in Libya should be completed by this fall. As part of that process the government is conducting a comparison study of the licensing regulations in eight other nations.
El-Badri said Libya's current practice of securing new exploration and production contracts through direct negotiations would likely be replaced, at least in part, by a competitive bidding process based on international practices.
Libya likely will kick off an international bid round in early 2000.
Ibrahim Baggar, exploration manager for Libya's National Oil Corp., told the over 400 conference attendees that Libya's first competitive international tender will include remote and frontier acreage principally in the Kufra and Cyrenaica basins. Opportunities in the Sirte, Ghadames and Murzuk basins may be deferred until ongoing direct negotiations with several European and Canadian companies are completed.
Baggar also said a number of blocks in the Sirte Basin and extending across the Atchan Saddle between the south of the Ghadames Basin and the northwest Murzuk Basin have been opened for participation by foreign companies. Currently the blocks are held by NOC subsidiaries. This acreage will presumably be available through direct negotiations.
Additional blocks have been designated for future offerings -- most located offshore in the Pelagian Basin and onshore in the Ghadames Basin.
Opening the Doors
Future exploration and production investment opportunities in Libya also are expected to include enhanced and improved oil recovery projects on existing state-operated fields as well as expansion of Libya's natural gas sector, according to the International Oil Letter. Proven Libyan gas reserves are estimated at more than 52 trillion cubic feet recoverable, with NOC statistics placing upside potential at some 70 trillion cubic feet.
Agip is building a 520-kilometer gas pipeline, linking Tripoli and Sicily. Design throughput capacity is 800 to 900 million cubic feet a day, and the pipeline will move gas from Agip's onshore Wafa Field and some offshore fields. The export line is scheduled to become operational in 2003.
Libya would like its gas production to expand to about three billion cubic feet daily by 2006, and one project aimed at achieving that goal is the development of the 1.5 trillion cubic feet Afshan gas field in the Murzuk Basin. Direct negotiations are favored for Afshan and other undeveloped gas discoveries.
International interest in a Libyan licensing round could be substantial. While the vast majority of Libya's large oil fields were discovered in the first decade of exploration from 1958 to 1969, recent developments have again piqued interest in the North African country, despite the political and logistical problems.
One of the most exciting recent discoveries in Libya is a 500 million-barrel oilfield uncovered on the Elephant prospect in the remote Murzuk Basin by Lasmo in 1997. The company drilled five dry holes on the block before hitting the giant field on the sixth attempt.
Mike Buck, business managing director for Lasmo Grand Maghreb, told the Geneva meeting that substantial opportunities exist for oil and gas companies in Libya. In fact, Libya and the whole of North Africa is a core area for Lasmo.
Baggar estimates the country's remaining undiscovered in place reserve potential at 107 billion barrels of oil equivalent. Of that total, NOC assigns:
- 12 billion barrels of oil equivalent to the offshore.
- 11 billion BOE to the onshore Ghadames Basin.
- 35 billion BOE to the Murzuk Basin.
- 24 billion BOE to the more mature Sirte Basin.
The lesser explored Kufra and frontier Cyrenaica basins are estimated to have in-place reserve potential of 19 billion BOE and six billion BOE respectively.
Libya's first oil discovery was made by Esso Standard in 1957 in the western Ghadames Basin and was a continuation of a Paleozoic trend that had yielded some big discoveries in eastern Algeria. However, the prolific Sirte Basin became the focus of companies after several magnetic surveys outlined the structural make up of the basin, according to Eberhard Klitzsch, a professor of geology at the Technical University of Berlin. He has spent years studying the geology of Libya.
From 1958 to 1968, 16 major oil fields were discovered in the Sirte Basin -- each with recoverable reserves greater than 500 million barrels of oil. Four of those fields had recoverable reserves of more than two billion barrels.
The Amal Field, discovered in 1959, is the largest field with recoverable reserves of over 4.2 billion barrels. The Gialo Field, discovered in 1961, has approximately four billion barrels of recoverable reserves.
Although the early years were a heady time, activity since the mid-1970s has not yielded the same results. Don Rusk, a Houston consulting geologist who worked in Libya for years, said 75 percent of Libya's approximate 46 billion barrels of oil reserves and at least 40 trillion cubic feet of gas were found by 1969.
The Sirte Basin
However, there is still plenty of room to search in Libya, and renewed interest by the international industry could yield new giants. In fact, Lasmo's recent success proves there are still elephants hiding in Libya.
"In spite of the long years of exploration in Libya, many large areas with established hydrocarbon play elements -- reservoir, source, seal, trap and timing -- are remarkably under-explored, particularly in the deeper parts of the productive basins," Rusk said.
"For example, in the Sirte Basin center, the Sirte Deep, or Ajdabiya Trough, is an area of more than 45,000 square kilometers, and only 20 wells have reached depths greater than 3,500 meters," he said. "This trough contains 5,000 to 7,000 meters of Mesozoic and Tertiary sediments with established reservoir and source beds."
He continued that oil and gas reserves are contained in four of the seven main sedimentary basins in Libya -- the Sirte, Ghadames or Hamra, Murzuk and Tripolitania. The Kufra Basin, in the southeast, has minimal if any potential. The Cyrenaica Platform has some Paleozoic possibilities, but lacks a discovery to date. The Benghazi-Derna basin in the eastern offshore is essentially a frontier basin, although one well did test oil at commercial rates.
The Sirte Basin, while the most mature of Libya's basins, remains an important exploration region. The Sirte is a Cretaceous to Tertiary basin with a series of horst and graben structures that developed during the Cretaceous and continued through the Paleocene, and became active again in Eocene and Oligocene time, according to Klitzsch.
Source rocks in the basin are mainly late Cretaceous shales and some Paleocene shales.
Other positive elements of the Sirte for oil exploration are reefs that grew on the horst structures.
"The structural development together with spacial distribution provide optimal preconditions for an oil province," Klitzsch said. "There are a wide variety of structures present in the basin, ranging from pure reefs, to anticlines to pinch outs. Oil fields in the basin produce mainly from Cretaceous and Paleocene strata, but oil has been found from Cambro-Ordovician up to Oligocene."
Original recoverable reserves in the Sirte are on the order of four billion tons, or over 29 billion barrels of oil.
"This is a major oil province in Libya and will likely remain the major province," he said. "Only about two-thirds of the oil has been found in the Sirte Basin, in my opinion, which leaves a great deal to be discovered.
"Compared to U.S. basins the Sirte is only lightly explored."
The Murzuk Basin is highly prospective with a horst and graben structural set up similar to the Sirte, but of a different age, according to Klitzsch. In addition, there are excellent late Ordovician reservoirs of glacial origin.
Three giant fields already have been found in the basin, and exploration has just scratched the surface, so there is tremendous future potential.
The Murzuk's disadvantage is its remote location hundreds of miles from the oil infrastructure and contractor support found in eastern Libya.
The Ghadames Basin in northwest Libya is a large Paleozoic basin that extends into Algeria, and source rocks there are the same shales that source the largest North African oil field located in Algeria, Klitzsch said.
There have been a number of discoveries in the basin, but no giants.
"This basin is likely under developed structurally," he said, "so the potential for very large fields is not comparable to the Sirte.
"However, exploration has not been intensive, so there is a great deal to learn about the basin, and there is good potential for future discoveries."
Other areas of Libya, including offshore, are prospective, but exploration has been so light the jury is still out on just how much oil will be found. Future activity certainly will help delineate these regions.
Exploration activity has continued in Libya since the U.S.-imposed sanctions, but the embargo has created some problems for the Libyan petroleum industry.
Klitzsch said exploration activity did drop off after the embargo, but the sanctions' primary impact has been in the areas of travel logistics and acquisition of necessary supplies and parts.
"It has been difficult to get in and out of Libya and to move around within the country," he commented.
Lasmoís Buck said in his talk at Geneva that exclusion from Libya of certain oil field contractors due to the sanctions has limited competition, resulting in higher prices for equipment and services. Restrictions on certain equipment and technologies led to inefficiencies, waste and less than ideal solutions to problems.
He said the road-air journey between Tripoli and Lasmoís headquarters in London via Tunisia is quite inconvenient and in some ways risky. This, combined with the limitations on air transportation within Libya, made the firm's operations in the already remote Murzuk Basin a major challenge.
Despite the difficult recent history between the United States and Libya, the Libyan oil officials are anxious for U.S. companies to return to the country, according to Klitzsch.
"Libya is looking forward to American companies coming back because they are in general more aggressive in their exploration efforts," he said. "Libyan officials understand this."
So while the future of U.S. companies in Libya remains a question, Libya is pushing ahead to bring its petroleum laws in line with other oil producing nations. The country needs to replace reserves from those early depleting giants -- and offering additional acreage to entice international companies is the first step to achieve that goal.