Oil Industry Disappointed with Results in Libya

August 23, 2010

Many larger players in the oil industry have been concentrating for years on producing oil in the Gulf of Sirte, off the coast of Libya, yet recent explorations have been disappointing.

Bp, ExxonMobil, Chevron, and Conoco-Phillips are all working in the waters off of the Libyan coast.  The biggest producer thus far has been the Waha Oil Company, which is a joint venture between National Oil Corporation and Conoco-Phillips, Hess, and Marathon.

BP has large expectations for the area to help sway their financial concerns as they make plans to drill the first deep-water oil well in the area this Fall.  The well will be the largest single investment BP has ever made to oil exploration.

BP makes this commitment amidst a recent history of failed exploration efforts, however.

In 2004, Libya finally lifted its sanctions upon the oil industry, causing an influx of international companies into the arena.  Libya held four licensing rounds in three years, from 2005 to 2007, which incurred heavy competition from oil companies hoping to reap profits from the under-explored country with the largest proven oil reserves in Africa.

In recent years, however, Hess is the only company to discover commercially-viable oil resources in the Gulf of Sirte, in its Arous el Bahr well.

ExxonMobil drilled two exploration wells in the gulf, which proved to be dead ends.  The company still has no oil production from its efforts off the coast of Libya.  Chevron also drilled an exploration well in 2009, which proved to be of no avail.

Although Royal Dutch Shell is in the process of rejuvenating a 39 year-old liquefied natural gas plant in Libya, the company has also had no positive response from its onshore or offshore efforts, including two existing wells in the gulf and two wells underway.

The biggest foreign oil company conducting business in North Africa, the Italian company, Eni, has two producing offshore fields which have been in operation in shallow water in the Gulf of Sirte since the 1970’s.  However, they are currently not engaged in any other exploration efforts within the area.

Over the last ten years, Eni has invested $50 billion into their oil operations in Libya, Tunisia, Algeria and Egypt, which comprise 35% of their total oil production revenues.

Other companies with planned drilling operations in the gulf include Gazprom of Russia, Petrobras of Brazil, and Indonesia’s Pertamina.

BP still is positive in its expectations for the area as it plans to drill at least five wells in the Gulf of Sirte.  After their costly accident in the Gulf of Mexico, BP is under considerable criticism over its current drilling operation, not the least of all because the Libyan well is 656 feet deeper than the disastrous Macondo well.

Additionally, United States senators are putting increased pressure upon BP as they investigate the connection between the company’s lobbying of the English government for the Scottish government’s release of Abdel Basset al-Megrahi, the Libyan man convicted of the bombing of Pan Am Flight 103 over Lockerbie in 1988, and their acquisition of Libyan offshore drilling contracts.