By Prof. Jamal S Ellafi,
Economic researcher in the oil and gas industry
Libya is a huge country with considerable petroleum resources and marginally small population. Since the discovery of oil in 1959, the North African country strives to improve its economic position in the region and to better its petroleum industry. From the start of Libyan production, Libya pioneered in many petroleum industry indicators such as first LNG producers, largest reserve holders in Africa.
Major and international oil companies very much enjoyed early era of Libyan petroleum contracts (concessionary contracts) that allowed them control of the production of oil from the Libyan kingdom petroleum field, Libya produced as much as 3.5 million barrel of oil in 1970.
New Libyan government came to power in 1969 after toppling the Libyan king which followed by subsidizing the petroleum industry in the 1971 and abolished previous petroleum contracts. Again Libya was pioneer as first OPEC member to introduce production sharing contract PSC which forced all major oil companies to embrace it, in a step by the Libyan government to regain control of Libyan petroleum resources and production. Soon after that Libya’s production figures indicated a sharp decline of Libyan petroleum production due to U.S. government eagerness to tame the north African leader through imposing sanctions and boycotting almost all U.S. petroleum developing activity in Libya.
The tension reached its peak in 1986 after the USA bombed the two Libyan cities; Tripoli and Benghazi, oil production at that time was around 1.1 million barrel per day. Few but sizable petroleum discovery were made that boost Libya’s petroleum reserved which, made Libya once more the hottest spot for oil exploration during the 1990s and 2000s. Few problems have to be solved politically before the U.S. government lifted its sanctions and allow their mighty petroleum companies enter to Libyan petroleum fields in late 2004.
Libya invited all petroleum company to participate in the first and second round of petroleum contracts knowing locally as EPSA VI. Between both rounds, a total of 47 EPSA VI contract were signed. The result was outstanding economically for the Libyan national oil company (LNOC), after publishing the results, many skeptics questioned the seriousness of the signed major oil companies. 27 EPSA VI contracts gave the LNOC 88% production Share of any oil discovered, eight of them between 88% to 80% for Libya, the rest not less than 70% in 2008. Negotiation rounds were a huge success for the Libyan NOC and its administration. Few major oil companies announced sizable petroleum discovery in number of wildcat well drilled during 2010, a promising future was awaiting the North Africa nation, but the industry luck just run out.
Libya engulfed and still have in eight years of civil war since 2011. All major petroleum companies ceased their activities and moved out of Libya at the beginning of Libyan escalation. Many Libyan governments after Gaddafi failed to hold a grip on the fast country, the division still widely speared with no light at the end of the Libyan tunnel are seen yet. Major oil companies are not obliged legally to the previous Libyan contracts since LNOC declared force majeure many times since 2011.
Attempts to motivate them to start petroleum activities failed, with an indication of LNOC vulnerability is perceived by oil players in the international oil markets. In 2018 Libyan National Oil Company allowed the sale of U.S. Marathon Oil 16.333% stack of Libya’s Waha concession for 450 million US dollar to French Total, although LNOC should and could have bought it and increase its control of the Waha concession, not doing that many critics questioned LNOC credibility of protecting Libyan petroleum interest. Before that in the middle of 2017, the U.N. backed government in Tripoli tried to side with German’s Wintershall oil company by allowing them to convert their concession contract to EPSA IV contract only for LNOC to oppose such move. Libyan NOC is currently vulnerable without a strong and unified Libyan government. Current effort to entice international company to come to Libya will not work, LNOC should concentrate heavily on improving its scattered oil fields which in constant need for technical and financial attention, and many of which will cease their productions activities imminently.
To contact the writer: Prof.email@example.com
Disclaimer: The views and opinions expressed in this article are those of the writer, and do not necessarily reflect those of the Libya Observer