Operating Environment in Libya

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Overview

Since 1973, petroleum rights have been granted under a series of Production Sharing Agreements (PSAs) and from 1979 the National Oil Corporation (NOC) was allowed to enter into agreements with foreign companies.[1]

Foreign oil producers in Libya now operate through Joint Ventures (JVs) with the NOC. From 2003 onwards, the NOC began to transfer all contracts signed with international oil companies (IOCs) to the more stringent EPSA IV model, which reduced IOC profit shares in return for extending the period of their licenses. However, by the time fighting broke out which led to the revolution in 2011, not all contracts had yet been transferred to the new framework.

In 2007 JVs involving foreign firms producing oil and gas in Libya were forced to change their names to better reflect the country's history and geography. For example, the JV operated by Spain's Repsol became Akakoss Petroleum Operations (APO), a reference to the Akakoss mountains in the south of the country. Similary, Italian Eni opted for Mellitah Gas, named after the region where it operates west of Tripoli. Total's operation became Mabruk Oil, the word 'mabruk' meaning 'congratulations' in Arabic.[2]

As of 2008, the top operator in Libya by acreage was the NOC. They were followed by Occidental, Repsol, BP, RWE, OMV, ExxonMobil, Woodside, Eni and StatoilHydro.[3] The chart below shows relative oil production by state-owned companies and IOCs in the country.

IOCProduction2010b.jpg

Regulatory Framework

According to the Tripoli Post, many Libyan experts consider the terms of Libya's [EPSA IV Licensing Round[|EPSA IV contracts]] to be favourable and transparent but remain among the toughest in the oil industry. The publication claimed that the EPSA IV agreements are not popular among IOCs and that they have caused a number of them to pull out of the Libyan market during the later years of the Gaddafi regime. Oil major Shell's withdrawal from its operations in the country in 2012 was cited as a sign that these companies and the Libyan government "do not see eye to eye".[4]

Following the revolution that toppled the Gaddafi regime, the National Transitional Council (NTC) appointed a group of 20 people to review nearly 10,000 business contracts, including oil contracts, signed under the former regime, with the aim of detecting corrupt activities. While this contributed to investor uncertainty, Deputy Chairman of the NTC Mustafa El Huni attempted to calm investors over the move by stating that "we have no intention to nationalise or to do something radical. Even if it's an unfair agreement or unfair contract, we'll sit down with a spirit of cooperation and we'll come to agreement with those entities."[5] However in January 2013 Reuters reported that the committee set up to review the oil deals had made little progress due to the slow handover of documentation, according to one of its members. and had been dissolved when the mandate of the transitional authorities ended with the July 2012 elections. No new task force had been set up at the time.[6]

Security

According to the Wall Street Journal, the heightened security fears arising from the killing of the US envoy to Libya in September 2012 has slowed the return of foreign oil workers returning to Libya. The events caused IOCs in the country to intensify their security precautions. According to the report, even before the death of the US envoy, some oil service companies and those with exploration concessions revised their staffing plans for Libya.[7]

Oil installations became a focal point of popular protests in post-revolution Libya, with demonstrations in 2012 shutting down the eastern Zuetina oil terminal, disruptions which threaten to cut output. Amrita Sen, chief oil analyst at Energy Aspects, told Reuters in early 2013 that "we have seen time and time again over the last few months protests have shut down refineries and refineries are directly linked to oilfields... It's a cumulative effect of constant struggles like this that impact output."[8]

References

  1. Oil and Gas in Libya - Overview ”. Mbendi, retrieved 21 October 2011.
  2. Libya - The Operators & Fields - The Foreign Oil Producers”. The Free Library, retrieved 21 October 2011.
  3. Doing Business in Libya”. Deloitte, retrieved 21 October 2011.
  4. Shell’s Pulling Out of Libya: A Warning Message to both Oil Authorities, People”. Tripoli Post, 31 May 2012.
  5. Libya tries to calm wary investors over review”. The National, 20 May 2012.
  6. Libya's silence on oil deals a setback for transparency”. Reuters, 25 January 2013.
  7. Security Fears Cloud Libyan Oil Growth”. Wall Street Journal, 14 December 2012.
  8. Libya's east heightens calls for control of oil”. Reuters, 20 May 2012.