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With or without foreign help, Libya’s 2m-barrel goal looks tough

Libya is hoping to double its crude oil production over the next three to five years, but analysts have warned that a lack of investment and the political crisis that has led to the country having two rival governments are jeopardising those plans.

The country’s National Oil Corporation (LNOC) announced in June that it would drill more than 120 oil and gas wells this year, and carry out maintenance on over 1,300 more. It is aiming to raise output from 1.25 million barrels per day to 1.5 million bpd by the end of this year and about 2 million bpd in the longer term.

However, in the same week, oil services company SLB told LNOC it was suspending its operations in Libya on July 1 because of unpaid bills.

The letter announcing the US company’s decision – addressed to Farhat Bengdara, LNOC’s chairman, and leaked to the press – said it was owed more than $242 million.

SLB, formerly Schlumberger, is working on various projects in Libya including the large but troubled Hamada oil and gas field. Its partners in the country include Italy’s Eni, the UAE’s Adnoc, France’s TotalEnergies and Turkish Energy Corporation, as well as LNOC subsidiaries.

The US company told AGBI that it reaffirmed “its commitment to support LNOC efforts to develop the Libyan energy sector”.

SLB is not the first Western business to have difficulty securing payment from the national oil company. SGS, a Swiss testing and certification company, exited Libya last year for the same reason.

The challenges of operating in the North African country were highlighted again in March, when energy minister Mohamed Oun was suspended. He was reinstated two months later, after an investigation cleared him of corruption.

Despite this, interest by foreign majors remains high. Eni, BP of the UK and Algeria’s Sonatrach are all resuming operations in Libya after a 10-year absence.

What impact, then, will SLB’s decision have? “The goal to raise production would be certainly jeopardised if SLB leaves the country. Yet it will be challenging even with SLB,” says Francesco Sassi, a researcher at Ricerche Industriali ed Energetiche in Bologna.

Oil and gas represents about 90 percent of Libya’s economic activity and Tripoli is eager to be considered a reliable supplier to Europe.

It exported 432 million barrels of oil last year, earning nearly $36 billion, according to LNOC. It was also the fifth biggest gas exporter to Europe, sending the fuel mainly to Italy through the trans-Mediterranean GreenStream pipeline.

Eni produces gas at the Wafa and Bahr Essalam fields, which it sends to Italy. Last year, the company committed to investing $8 billion in another gas project.

Libya has the largest crude reserves in Africa, but experts say its energy infrastructure is old and needs large-scale investment. Frequent blockages of ports and fields are also a concern.

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