Libya Sees Intl Investment of $7B in Oil Sector to 2015

LONDON Aug 31, 2006 (Dow Jones Newswires)

Libya is expecting international oil companies to invest $7 billion to 2015 in oil and gas exploration and help discover another 20 billion barrels of oil, a senior Libyan oil official told an investment roadshow promoting its third bidding round Thursday.

"Discovering 20 billion barrels is a very conservative target for Libya," said Hussein Seddiq, exploration manager at Libya's National Oil Co. (NOI.YY).

Libya has around 100 billion barrels of crude in potential reserves in addition to its 144 billion barrels of reserves in place, Seddiq said.

Decades of sanctions have left Libya's oil sector vastly under-explored. The country also has very competitive exploration, development and operational costs as well as being relatively safe and open to foreign investment with its use of production-sharing agreements.

According to Libya's exploration master plan, the North African state hopes by 2015 to reach production levels of around 3 million barrels a day - the country's output in the 1970s - peaking at over 3.5 million b/d in 2019. Currently Libya is producing around 1.7 million b/d.

The plan envisages drilling a minimum of 50 exploration wells a year and shooting over 14,000 square kilometers of two dimensional and three dimensional seismic surveys - all of which would cost around $4 billion.

Seddiq said the success rate for exploration wells was around one in four from 1957 to 2004.

Although this is the first bidding round under Libya's new oil chief Shokhri Ghanem, it is the third for Libya since it reopened to foreign investment after U.S. sanctions were eased in 2004.

Seddiq said the NOC plans to have another four or five bidding rounds in the future offering 220 blocks.

Libya's bidding rounds have drawn a lot of interest because its low-sulfur, sweet crude is easy to process into high-value petroleum products such as gasoline.

Other advantages for Libya are its proximity to key European refining centers in the Mediterranean and its shorter tanker travel time to U.S. markets than Persian Gulf producers.

However, this time around Libya has made some changes to the bidding and contract model, of which the latter mostly was greeted positively by oil executives at the presentation in London.

Companies will now be able to extend the exploration period of the contract to allow for the completion of an appraisal well.

Before, Libya only allowed three months for an oil company to complete the well, but now it is open-ended, partly to give companies the chance to track down key drilling equipment, said Ahmed Gaddah, an NOC legal advisor.

"This had to be done so that companies weren't limited to three months to get the rigs and finish all the work," he said.

Oil executives attending the presentation said some of the changes sounded positive and they welcomed the transparency in the bidding process.

"The extension is excellent because otherwise there's only a limited amount of time to explore with the shortage of drilling rigs in the market at the moment," said one Western oil executive.

Bidding procedures also have been amended.

Bids in this round will be evaluated on a points system whereby points will be awarded for each of the main parameters, which include the work program and the amount of the signing bonus.

The company with the most points will win the contract.

A company interested in bidding has to submit qualifying documents no later than Sept. 9, and companies will be informed whether they qualify by Sept. 22.

The data room will be open in Tripoli from Sept. 27 to Oct. 11.

The deadline for bids to be submitted is Dec. 20 and the winners will be announced that day in Tripoli. The contracts are expected to be signed during the second half of January next year.

Libya is offering 41 blocks in 14 areas in the main oil producing basins, including the Sirt, Ghadames and Kufra onshore. Some offshore blocks also were on offer.

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