Libya discovers three new oil fields

Libya's National Oil Corporation (NOC) has announced the discovery of three new oil fields. The first discovery was made by Turkish Petroleum (TP) working on experimental wells B1-17/3, on Block 147, in the Morzuk Basin in southern Libya. Preliminary tests showed that the first well has the capacity to produce around 265 b/d. Further tests are expected to be carried out in due course.

The other two wells, said to be rich in both oil and gas, were discovered by a consortium of several companies affiliated with the NOC and the Libyan Investment Institution. Libya has estimated oil reserves of 60 billion barrels, and gas reserves in the region of 1,500 billion cubic metres.

In other developments, the head of Libya's OPEC delegation has said that Libya will not increase production if speculation drives oil prices to $100 per barrel, but will look to fundamentals to determine whether the group needs to hike output.

Reiterating his earlier point about output levels head of NOC Dr Shukri Ghanem said, "Once we feel that world demand is increasing and there is not enough supply in the markets in that case we will increase the production."

"There is a lot of oil in the market; there is no shortage, so putting more oil [in the market] would not be prudent," he added.

Source: Africa en ligne, Reuters

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

Attacking Libya Press

Much commentary has interpreted the arrests of Al-Ghad's journalists simply as an escalation of the row between reformists and the old guard. The media were certainly issued with a very stern warning and their ability to criticise has probably been constrained – at least in publications printed and distributed within the Jamahiriya.

However, Oea's attack on long-time hardliner Ahmed Ibrahim, who is currently the head of the World Centre for Studies and Research on the Green Book, adds a deeper dimension to the conflict.

Ibrahim is a die-hard figure who still goes to the limit to defend the revolution. Despite his demotion in 2008 from deputy secretary of the General People's Congress to his current position, and despite his well-known misgivings about Saif al-Islam, he remains very close to the Leader, who is a cousin, and is a key figure within the upper echelons of the regime.

Libya Press goaded Ibrahim by reporting that he had held a series of meetings to mobilise support for a special internal organisation to prevent Libyans returning from abroad from being given leadership posts.

This is a very hot topic at the moment. Saif al-Islam is regularly criticised for bringing in exiles who have made their peace with the regime and appointing them to senior positions.

The article also claimed that Ibrahim had called for foreign companies to be barred from taking part in the country's development plan. It reported his view that economic openness and foreign investment are unhealthy phenomena that have damaged the economy.

The article concluded that Ibrahim wanted to take Libya back to the 1980s, a decade considered to be dark by many Libyans as it was characterised by particular brutality. It painted Ibrahim as single-handedly standing in the way of the country's future development.

Given that all the journalists who were arrested were from Libya Press, it seems reasonable to assume that Ibrahim may well have been behind their incarceration. He is certainly powerful enough to have made such a move. Indeed it is doubtful that al-Mahmoudi would have had the power to issue such instructions without backing from more senior elements in the regime.

Therefore while the arrests fell within the context of the battle between reformists and hardliners, they also appear to have been motivated by important figures within the regime taking revenge for having been publicly insulted.

Ibrahim has never been shy about hitting back at his enemies. Many remember the famous showdown in 2005 in the General People's Congress between him and his nemesis, Shukri Ghanem, when the latter was still prime minister. Ibrahim objected to a series of policies that Ghanem had tried to introduce to open up the economy.

In a bitter exchange of words he said of Ghanem, 'You cannot respond to or sympathise with someone who wants power for himself.'

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2010 Menas Associates

Security for companies working in Libya of interest to local authorities

The level of security for companies working in Libya remains a matter of acute interest to the local authorities. The likely withdrawal of a number of IOCs at the end of unsuccessful exploration programmes is recognised by Libya's senior planning agencies as an unwelcome setback to the economic development programme.

This will negatively affect Libya's principal economic sector, and considerably more exploration will need to be undertaken to ensure that reserve-to-production ratios do not fall significantly. The past six months - including the news of IOC withdrawals and soft world oil demand - have reinforced the pessimism for a strong surge in oil income for the immediate future.

It is interesting that NOC head, Dr Shukri Ghanem, was very sharp in making clear that the departure of IOCs was nothing unusual and that Occidental would remain for the time being. He was also at pains to assert that the long-term hydrocarbon development programmes are still on course. As noted last week, Shell's and BP's current exploration operations will be crucial. So far, BP remains convinced that its vitally important offshore drilling programme will begin before the end of the year. According to Ghanem, care has been taken to ensure that a repeat of the Gulf of Mexico oil spill will not occur.

The negative impact of the withdrawal of some IOCs should not be over emphasised. Indeed, the simultaneous presence of 47 IOCs in Libya was – because of many reasons, including its inadequate infrastructure and NOC's insufficient numbers of senior personnel who are able to negotiate with the IOCs – placing a severe strain on the country to cope with the influx. The income flows from oil ought, however, to be adequate to sustain the present level of activity both in oil and other key areas.

It must be expected that the security for the oil industry will continue to be enforced. Libya is well aware that its oil reserves position is fair but not good and that it needs to protect those overseas companies which remain inside the country.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2010 Menas Associates

Many IOC's unsure whether or not to stay in Libya

Chevron is reported to have indicated its intention to withdraw from Libya at the end of its existing five-year exploration licences. Speaking at a press conference on 2nd October, National Oil Company's (NOC) Exploration Director Haj Fitouri stated that other IOCs who were not expected to extend their stay included Australia's Woodside Petroleum and Abu Dhabi's Liwa Energy.

Among those expected by NOC to remain are Occidental, which has a continuing link as a partner in the Zuetina Oil Company, and also Hess, Petrobrás, Medco Energy, Oil India and Sonatrach. NOC saw the withdrawal of this significant number of major companies as “expected” because no commercial oil had been discovered during their exploration programmes. Head of NOC Dr Shukri Ghanem has been very quick to indicate that Occidental retains an interest and is an NOC partner for the longer term.

While NOC's prognosis of a decline in the overall number of IOCs which will remain in Libya is undoubtedly correct, it is less certain which of the companies will stay and which will remain in some capacity. With the licenses from the first EPSA IV licensing round due to end in the near future – and very little new oil having been found in the past five years - many IOCs will be weighing up their options about whether to extend their licenses, leave the country or remain in the hope of negotiating a separate bilateral deal outside any licensing round. They will obviously be taking other factors into consideration, including their existing world-wide portfolio; more attractive opportunities elsewhere; the very onerous fiscal terms imposed by NOC; the way in which the goal-posts are always being moved by NOC; local content demands; etc.

Given Ghanem's insistence that he is prepared to be flexible when negotiating new terms for the IOCs, it is, therefore, possible that Chevron, which has already downsized its Libyan operation very considerably, will decide to stay and negotiate bilaterally with NOC.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2010 Menas Associates

Libya: Political Old Guard reduced to attrition

The strength of the political Old Guard is being reduced by attrition as age takes its toll and its members cease to be corner stones of the Qadhafi regime. The latest blow in this section is Khalifah Hanaish who for many years was an important apologist for Colonel Qadhafi and manipulator of tribal politics. He is reported to be seriously ill in Austria.

He rose from the ranks to become a general in the Libyan army in charge of aspects of security and armaments, on which issues he reported directly to the Leader. His loyalty was total and until two years ago, he was an important player in the circle around the Leader.

This process of attrition is gradually reducing the number of experienced and dependable senior personnel available to the Leader in his management of the country. As new individuals take over the reins of influence, so the regime will be less confident of its base.

In an interesting lecture to the Lawyers Union in Tripoli, a speaker made the point that the Revolutionary Committee movement and indeed, the revolutionary committees themselves are illegal under the present law since no parties are allowed to exist. He pointed out that the evolution of the movement has meant that the majority of ministers in the cabinet have always been from the ranks of the revolutionary committees.

It will be recalled that in recent years only two ministers have not had close connection with the revolutionary committees – Mustafa Abdel Jallil who was Minister of Justice and was nominated by Saif al-Islam Qadhafi and the head of NOC, Dr Shukri Ghanem whose alliance with Saif al-Islam was among the reasons for his accession to the cabinet. The narrowness of the cabinet's origins tells of the poverty in organised political activity and indicates that a popular dissident leader would face limited opposition in the country.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2010 Menas Associates