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Libya to offer drilling rights to increase gas output - extended

Libya, holder of Africa's largest oil reserves, plans to offer exploration rights in 20 plots of land to increase natural gas output, as European demand for the fuel rises.

„We'll offer gas-prone areas to exploration in four to six months,” Shokri Ghanem, the head of Libya's state-run National Oil Corp., said in an interview today in the Austrian capital, Vienna. „It will be production sharing contracts like the ones offered for oil.” The European Union is seeking to increase its imports of gas from Africa and the Caspian Sea in order to reduce dependence on Russia which now supplies about a quarter of the bloc's needs.

Foreign companies will be invited to bid for exploration rights in an auction similar to the three that the North African nation has held since the lifting of the US sanctions in 2004, said Ghanem. The Libyan government will have a share in any discovery made, he said. Libya awarded a total of 45 plots in the three bidding rounds, to companies including Woodside Petroleum Ltd, Occidental Petrolem Corp., Eni Spa, Tatneft, BG Group Plc and China National Petroleum Corp. Libya produces about 12 billion cubic meters of gas a year, of which 8 billion are exported to Italy by a sub-sea pipeline inaugurated in 2004, less than a billion are liquefied and sent to Spain on tanker ships, and the rest consumed locally, said Ghanem.

Finding more gas may allow Royal Dutch Shell Plc or other companies to build a new plant for liquefied natural gas, or LNG, he said. LNG is gas cooled to a liquid to allow its transportation by tankers over distances too far to be linked by pipelines. Libya's gas reserves of 52 trillion cubic feet are the fourth-largest in Africa, behind Nigeria, Algeria and Egypt, according to BP Plc. Libya in 2005 selected Shell as a partner to refurbish its LNG plant in Marsa Al-Brega, in the center of the country, and to lift its output from 700,000 tons a year to 3.2 million tons a year by 2010. Shell, which will spend up to $450 million on the works, said the contract also opens the possibility for another LNG plant in case sufficient gas reserves are found. Stepping up exploration will allow Libya to increase its crude oil production capacity from 1.8 million barrels a day at the end of 2006, to 2 million barrels a day by the end of this year, said Ghanem.

Arabian Gulf Oil Co., a fully owned unit of National Oil Corp., discovered an oil field this month that could produce 16,000 barrels a day in the western area of Ghadames, Ghanem said. Canada's Verenex Energy Inc., Australia's Woodside, Germany's RWE AG and Spain's Repsol YFP SA announced oil and gas finds in Libya over the past few months.

The nation is now producing about 1.6 million barrels a day, in line with its quota within the 12-member, Vienna-based Organization of Petroleum Exporting Countries, he said. (Bloomberg)