Gordon Feller
Libya is a member of the New Partnership for Africa’s Development and African Union. Italy, its main trading partner, is cementing political co-operation and boosting investment. The prospect of lucrative contracts and investments, especially in the hydrocarbons sector, has also encouraged companies in countries such as Australia, Canada, Russia, the US and China to develop or strengthen their ties with Libya.
Gazprom wants to buy all the exportable gas that Libya can produce and some of the country’s oil. In 2006, Gazprom, which now supplies about a quarter of Europe’s gas, signed a cooperation agreement with Algeria, heightening fears that the two biggest suppliers to Europe could act as a sort of gas-supply OPEC. Gazprom is also planning a joint venture with Libya’s National Oil Corp. (NOC) for refineries, as well as to build pipelines. Gazprom options increased when it formed a strategic partnership with Italy’s ENI in 2006, which allowed for energy asset swaps, including those Eni has in Libya. Libya plans to increase its gas output to 3.8 Bcfd from today’s 2.7 Bcfd.
Repsol, Total, OMV and StatoilHydro reached agreement with NOC to extend existing contracts for two onshore oil and gas blocks. Libya’s terms were harsh. The four companies agreed to pay a $1 billion signing bonus to Libya for access to oil reserves, payable over three years, as well as higher Libyan tax bills. OMV said its share of the bonus was $248 million, while the term of the agreements for were extended by 15 years for Libyan Block NC115, and 10 years for NC186. Under the new deals, the companies stand to net 13% and 12% of oil production from Blocks NC115 and NC186, respectively, after taxes.
The four companies are partners in the two blocks (except StatoilHydro in NC115). Predictions are to increase production on the two blocks by 80,000 bopd by 2012. OMV is one of several European oil companies that were active during the eight years the US imposed sanctions over Libya’s Tripoli’s suspected involvement in the bombing of a Pan American Airways jet over Lockerbie, Scotland. Occidental Petroleum, which was the first US company to resume operations after the sanctions, upgraded a 30-year agreement with NOC, which cover assets containing 2.5 Bbbl of recoverable light oil.
The NOC says less than a third of Libya, Africa’s fourth-largest country, has been explored for hydrocarbons. World Oil believes proved oil reserves stand at 35 Bbbl, and gas reserves at 52 Tcf. Libya believes that it can produce more than 3 million bpd by 2012, from the present 1.75 million bpd of oil last year, much of which was condensate and NGLs. 
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