IT'S NOT HOCUS POCUS: Just Focus on Libya Oil

Libya, a member of the Organization of Petroleum Exporting Countries (OPEC), holds the largest proven oil reserves in Africa, followed by Nigeria and Algeria (see below). According toOil and Gas Journal (OGJ), Libya had total proven oil reserves of 44 billion barrels as of January 2010, the largest reserves in Africa. About 80 percent of Libya s proven oil reserves are located in the Sirte basin, which is responsible for most of the country s oil output.

Libya hopes to increase oil reserve estimates with incentives for additional exploration in both established oil producing areas as well as more remote parts of the country. Recent increases in foreign investment have begun to slow as a result of uncertainties stemming from OPEC quotas, infrastructure constraints, and contract renegotiations.

Production

Despite Libya s oil reserves, oil production peaked at over 3 million bbl/d in the late 1960s and has since been in decline. The National Oil Company (NOC) would like to once again raise oil production capacity back up to 3 million bbl/d a target that the NOC has recently delayed until 2017. Nonetheless, crude oil capacity has increased somewhat over the past decade from 1.43 million bbl/d in 1999 to 1.8 million bbl/d in 2009. Crude oil production in 2009 was approximately 1.65 million bb/d, about 150,000 bbl/d below capacity but still above the production quota set by OPEC which is currently at 1.47 million bbl/d. Most of the short-term oil production increases are expected to come from enhanced oil recovery (EOR) processes and any major new production in Libya will require additional pipeline capacity for exports.

Exports

With domestic consumption of 280,000 bbl/d in 2009, Libya had estimated net exports (including all liquids) of 1.5 million bbl/d. According to 2009 official trade data as reported to the Global Trade Atlas, the vast majority of Libyan oil exports are sold to European countries like Italy (425,000 bbl/d), Germany (178,000 bbl/d), France (133,000 bbl/d), and Spain (115,000). With the lifting of sanctions against Libya in 2004, the United States has increased its imports of Libyan oil. According to EIA estimates, the United States imported an average of 80,000 bbl/d from Libya in 2009, up from 56,000 bbl/d in 2005 but, as a result of the U.S.economic downturn and subsequent decline in oil demand, 2009 levels were below 2007 highs of 117,000 bbl/d.

Libyan oil is generally light (high API gravity) and sweet (low sulfur content). The country's nine export grades have API gravities that range from 26.0o  43.3o. While the lighter, sweeter grades are generally sold to Europe, the heavier crude oils are often exported to Asian markets.

Refining 

According to OGJ, Libya has five domestic refineries, with a combined capacity of 378,000 bbl/d. Libya's refineries include: 1) the Ras Lanuf export refinery, completed in 1984 and located on the Gulf of Sirte, with a crude oil refining capacity of 220,000 bbl/d; 2) the Az Zawiya refinery, completed in 1974 and located in northwestern Libya, with crude processing capacity of 120,000 bbl/d; 3) the Tobruk refinery, with crude capacity of 20,000 bbl/d; 4) Sarir, a topping facility with 10,000 bbl/d of capacity; and 5) Brega, the oldest refinery in Libya, located near Tobruk with crude capacity of 8,000 bbl/d.

Libya's refining sector reportedly was impacted by UN sanctions, specifically UN Resolution 883 of November 11, 1993, which banned Libya from importing refinery equipment. Libya is seeking a comprehensive upgrade to its entire refining system, with a particular aim of increasing output of gasoline and other light products. In 2009, the NOC and the Trusta Consortium (United Arab Emirates) signed an agreement for upgrades on the Ras Lanuf refinery to expand output to 240,000 bbl/d.

Sector Organization

Libya's oil industry is run by the state-owned National Oil Corporation (NOC). The NOC is responsible for implementing the Exploration and Production Sharing Agreements (EPSA) with international oil companies (IOCs). NOC is also responsible for field development and improvements as well as downstream activities. IOCs operating in Libya work in exploration, production, transportation and refining and include Eni, StatoilHydro, Occidental, OMV, ConocoPhillips, Hess, Marathon, Shell, BP, ExxonMobil and others.

IOC participation in Libya s oil concessions was initially as high as 49 percent. However, changes to the production sharing agreements under the EPSA IV licensing round (2005) limited IOC production shares. The Libyan government has since required that IOCs already operating in the country rewrite existing contracts to comply with the new framework. The key elements included a reduction of the companies share of output (up to half of what it was) in return for a commitment of fresh investment and an extension of the license period (some up to 15 years).

Overseas Investment

In 2009, the Libyan government invested in Eni, an Italian oil company that has been operating in Libya since 1959 and is Libya s largest foreign oil producer. Through the country s sovereign wealth funds, Libya has been eyeing additional energy investments in Europe andAfrica.

Libya also has refinery operations in Europe through its overseas oil retail arm, Tamoil. Through Tamoil, Libya is a direct producer and distributor of refined products in Italy,Germany, Switzerland, and Egypt.

Source: http://www.eia.doe.gov/cabs/Libya/Oil.html

NUTSHELL:

Libya is in the news for all the wrong reasons. BP, other oil majors are worried and moving out ''expatriate'' workers. Libya has the largest oil reserves in Africa and has so far been able to leverage on its immense oil wealth to gain international mileage. This is an EIA analysis of the country's oil profile. This should help you understand what is at stake and in balance with the country's current turmoil. Let us hope for a positive outcome and that the turmoil is short-lived.