Libya Unites Large-Scale Production with Frontier Potential

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As activity in Libya’s hydrocarbon sector resumes, read more on how Africa’s largest potential producer is harnessing its singular frontier potential to attract major operators and grow power generation, in a series of articles from the Africa Energy Series Special Report: Libya 2020.

Home to the largest recoverable reserves on the continent, Libya’s vast and underexplored basins are sparking the interest of major operators, as the North African producer seeks to sustain oil output in the long-term.

While Libya saw the temporary halt of its oil production earlier this year due to conflict between the U.N.-backed Government of National Accord (GNA) and the Libyan National Army (LNA), the North African producer still retains the largest oil deposits in Africa, with more than 48 billion barrels of estimated recoverable reserves. Moreover, Libya produces sweet, high-quality crude that is both relatively easy to extract and sold at a premium, enhanced by the country’s close proximity to European markets.

While leading operators such as BP and Eni have exploited the country’s prolific Sirte Basin, the Murzuq, Ghadames, Kufra and Cyrenaica Basins, along with the offshore Gulf of Sirte, have been relatively under-explored and are estimated to hold extensive frontier potential. As a result, Libya offers attractive prospects in both mature and frontier basins, coupled with increasing domestic demand for the consumption of natural gas, petroleum and petroleum by-products.

The magnitude of Libya’s production potential has been demonstrated in recent months alone. In September, GNA and LNA parties signed a one-month cease-fire deal, enabling a return to oil production from 70,000-100,000 barrels per day (bpd) during the blockade to 500,000 bpd within less than a month. In October, the two parties finalized a more comprehensive cease-fire agreement, triggering the National Oil Company to lift the force majeure from its El Feel field and Sider and Ras Lanuf ports, and production to jump again – this time to 1,000,000 bpd.  

Plans for Increased Production

Prior to the blockade, several International Oil Companies (IOCs) were gearing up to further develop Libya’s substantial oil deposits. In December 2019, Total and the NOC signed an agreement that gave the French major a minority stake in Libya’s Waha asset. According to the agreement, Total will help the NOC to develop the North Giaolo and NC 98 fields in the Waha concession, increasing production by 180,000 bpd and investing $650 million.

In the same month, Russian oil company Tatneft resumed upstream activities in the Ghadames Basin after more than five years of delay. Throughout 2019, BP, Eni and Gazprom announced their intention to resume exploration activities in Libya, while OMV and Repsol planned to increase their upstream presence.

Before the suspension of oil exports, Libya’s production was on a steady growth trajectory, rising to 1.13 million bpd in December 2019 and planning to reach 1.5 million bpd in 2020 and 2.1 million bpd by 2023. Workovers on existing wells, infill drilling and resolution of technical and operational issues were to account for bringing 350,000 bpd of new output online this year. Fortunately, Libya was able to continue producing from the offshore Bouri and Al Jurf fields during the blockade, equating to two to three 600,000-barrel cargoes per month.

Going forward, the ability to reach ambitious production targets now depends on the establishment of political stability and the outcome of long-term peace talks, which hinge on foreign interference and the transparency of oil revenue distribution. Adhesion to OPEC-implemented quotas – from which Libya has been exempt to date due to the blockade – will also play a role in the country’s ability to achieve its next target of 1.3 million bpd.

Downstream and Export Infrastructure

With a strategic position on the Mediterranean, the oil-rich country is linked to several export terminals on its northern coast and boasts an extensive pipeline network. Libya exports from six major terminals: Es Sider (447,000 bpd), Marsa El Brega (51,000 bpd), Ras Lanuf (195,000 bpd), Tobruk (51,000 bpd), Zueitina (214,000 bpd) and Zawiyah (199,000 bpd).

While Libya’s five major refineries were offline for the duration of the blockade – with the exception of the Sarir refinery in eastern Libya – its refining capacity stands at 380,000 bpd, and the country produced 59,400 bpd of petroleum byproducts in 2019, of which 21,000 bpd were exported. Vast natural gas reserves, specifically in the Ghadames Basin, have also enabled Libya to become a major exporter of gas to Europe through the Greenstream Pipeline to Italy.

Spanning 540 km, the pipeline is supplied by the Bahr Essalam, Bouri and Wafa fields. Libya gas exports to Italy – its only gas export destination – averaged 15 million cubic meters per day and totaled 5.4 billion cubic meters in 2019, representing around 8% of Italy’s total gas consumption.