The largest oil reserves in Africa: Libya
Libya is exceedingly well endowed with hydrocarbon resources. Singlehandedly, Libya with its proven crude oil reserves of 47.1 billion barrels accounts for nearly 38% of the continent’s proven oil reserves. Libya not only has substantial reserves on an African scale, but also on a global basis. The country has 12 oilfields with reserves of over one billion barrels each and two others with reserves of between 0.5 and one billion barrels.
In this regard, it is no surprise that the Libyan economy is one of the most hydrocarbon-dependent in the world. In fact, the oil and gas industry accounts for almost 70% of GDP, 90% of fiscal revenues, and approximately 97% of export earnings. After the civil war caused oil production to fall to zero in August 2011, the sector made a quick recovery. Indeed, figures from OPEC show that Libya produced 1.51 million bpd of crude oil by October 2012, which is only slightly below the pre-crisis level of 1.55 million – 1.6 million bpd. However, the US EIA warned recently that
“the drive to ramp-up production as fast as possible has deferred routine and non-routine maintenance, which could cause production to stagnate or even fall slightly in the coming months.”
An improvement in the security situation
In order to sustain production at high levels, Libya will need to attract foreign workers back to the country; however, this will require an improvement in the security situation. In addition, since political risk remains high, spates of unrest could lead to stoppages from time to time, which would reduce oil output.
Protests at the Zueitina port caused operations at the port to halt since the start of 2013. As a result, production at the oil fields that use the port has also stopped.
Upstream exploration remained limited in 2012 despite Libya’s economic recovery as oil companies waited for an improvement in the security situation to allow foreign workers to return, as well as for more clarity regarding economic policy. By the end of November last year, only the National Oil Corporation (NOC) and Algerian state oil company Sonatrach were doing exploration.
A renewed commitment
After having to halt operations throughout most of 2011- 12, BP stated at the start of November 2012 that it was committed to oil exploration in Libya and that it would drill 17 new exploration wells, located both onshore and offshore. No timeline was given for the drilling.
Similarly, Repsol noted that it was making final preparations to start drilling in Libya in 2013. These two cases suggest that some companies are ready (or close to being ready) to invest in Libya again, which is very important because without investment oil production would gradually diminish.
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