LIBYA - The LNG Business.

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, and its term clients were Snam and Enagas of Spain.

(The first exporter of LNG in the world was Algeria, whose initial delivery to France took place in 1964).

However, this business has proved to be far less profitable to Libya than the production and export of oil, petroleum products or gas liquids, in view of a low price and high transportation costs for LNG.

Libya's LNG plant, at Marsa El Brega, was built in the late 1960s by Esso (Exxon) with a capacity of about 3.5 BCM/year. But the plant produced high- calorie LNG, no longer acceptable to importers. In view of this, Libyan LNG exports in recent years were limited to 1.2 BCM per annum with sales going to Enagas. The LNG was 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 modify 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. It is not clear when the plant would be ready soon, now that the UN has suspended sanctions against Libya and Tripoli can easily import the necessary equipment.

The consultant for this project has been Technip of France. The contract for refurbishing and modifying the plant was in 1993 valued at $50m. Technip has done the basic engineering work on the new system.

The owner and operator of the plant is Sirte Oil Co., an upstream subsidiary of NOC which is a major producer of natural gas. In addition to LNG, the plant has units with capacity to produce up to 6 MCM/day of natural gas liquids (NGLs) and 20,000 b/d of naphtha.

When a modified version of the plant becomes ready to operate at its capacity of 3.5 BCM/year, or more, over 55% of the LNG output will be exported to Spain. The rest should go to Turkey and Italy.

Under a contract signed in 1990 and valid from 1992 to 2008 (a renewal of its 1971-91 contract), Enagas is committed to lift 2 BCM/year. Enagas has offered to lift additional quantities during the winter but on spot basis.

Snam, the first to import LNG from Libya in 1971 under a 20-year contract, has declined to sign a new agreement because the Libyan price is not acceptable to the Italian utility. Instead, Snam has said it would lift the modified LNG on spot basis during the winter. (Snam's original contract called for CIF deliveries of 1.8m t/y. The company suspended liftings in August 1980, however, following disagreement over a new fob price demanded by Brega International, another NOC subsidiary marketing the LNG on behalf of Sirte Oil Co. which was dissolved in 1992. An annual contract was signed in February 1984 under which Snam was committed to lift 750 MCM/year as from April 1984, and the fob price was $3.45/million BTU, though actual liftings were much lower. Snam again suspended all liftings in 1986. It resumed buying the LNG on spot basis in October 1988. Its spot purchases in 1989 amounted to about 300 MCM).

Turkey has been committed to lift 1.5 BCM/year from Marsa El Brega, under a 25-year contract signed in August 1988. But no deliveries have been made since then, with LNG planned to be taken by Marmara Ereglisi, a terminal built near Istanbul to receive LNG from both Algeria and Libya. Turkey remains bound by contract to take the LNG once the modification at Marsa El Brega has been completed.