LIBYA - The BP Deal.

Under a wide-ranging gas E&P deal with NOC signed on May 29, BP could spend up to $25 bn in Libya to develop a major LNG export venture. Returning to Libya after a gap of more than 30 years, BP is to spend $2 bn on gas E&P operations to explore one of the largest territories in North Africa. The concession it has acquired has the potential for about 20 TCF of gas and production of 3,000 MCF/day.

BP's acreage comprises 30,000 sq km in the offshore Sirte Basin and 24,000 sq km in the onshore Ghadames Basin bordering Tunisia. MEED on June 1 quoted a BP executive as saying: "We are optimistic about the potential. There is a lot of unexplored territory in the Sirte basin, where there is potential for a number of gas fields. And the Ghadames acreage has the potential for large stratographic traps. We believe it will be a significant addition to the country's gas reserves".

The seven-year EPSA, which includes an option for extension, calls for a minimum exploration commitment of $900m, covering 17 exploration wells, and the acquisition of 30,000 sq km of 3-D seismic and 5,500 km of 2-D seismic exploration. The BP executive said: "Our intention is to spend well over the minimum commitment. We are planning a further 20 appraisal wells".

BP is the operator and majority stakeholder in the project, with Tripoli's investment vehicle Libyan Investment Corp holding the rest. The exploration programme, financed by BP, covers acreage in deep-water blocks 37-39 of the Sirte Basin and blocks 63-64 and 80-81 of the Ghadames Basin.

The development plan involves investment in gas processing, transportation and liquefaction for the export market. The BP executive said: "If the project is as successful as we hope, we are looking at multiple LNG trains to supply clean energy to Europe. Based on present train sizes, we would be looking at about four trains". Options include a single LNG terminal at Marsa el-Brega or Ras Lanuf in the north-east, or a terminal at Mellitah in the north-west to process gas from Ghadames, and a second terminal for the liquefaction of Sirte gas.

Background: Libya in 1971 became the second country in the world to export LNG, which is methane made liquid in order to be transported from the source to a distant market. Its term clients were Snam of Italy and Enagas of Spain. (The first exporter of LNG in the world was Algeria, whose initial deliveries to England and France took place in 1964).

However, the LNG business has proved to be far less profitable to Libya than the production and export of oil, petroleum products or gas liquids. This is because the capacity of the LNG plant has been limited in scale, and the Libyans have been less keen on the liquefaction business.

Libya's LNG plant, at Marsa el-Brega, was built in the late 1960s by Esso (Exxon) with a capacity of 3.2 t/y. But the plant produced high-calorie LNG, no longer acceptable to importers and the useable capacity has declined to 700,000 t/y. In view of this, Libyan LNG exports in recent years were limited to this capacity with sales going only to Enagas. The LNG is shipped to a terminal in Barcelona.

The receiving and degasification terminal of La Spezia in Italy, originally built to take Libyan LNG, has been modified for the normal low-calorie grade. This has compelled NOC to seek a modification of its liquefaction system. But work on refurbishing and modifying the plant to produce the normal, low-calorie grade of LNG has been delayed since 1992 because of a limited UN embargo and because of the US sanctions.