Tag Archives: BP

Libya’s Production Back on Track but Foreign Partners Could Still Be Frozen Out

As oil and gas production levels continue to rise in post-Gadaffi Libya, government officials have grown more confident that the country’s best chance for economic growth is back on track to meeting and exceeding pre-conflict levels. However, mixed messages to foreign partners and a lack of progress dealing with vital structural and stability issues threaten to derail the energy sector’s return before it can take hold.

By the end of February, members of the country’s appointed transitional government reported that oil production had reached 1.4 million bpd and would likely reach pre-war levels of 1.6 million by mid-summer. The country’s natural gas output also increased to 2.3 billion cubic feet during the same period from 2.2 billion at the end of January. Adding to the good news, Libyan officials have reported that new exploration efforts have finally become possible again.

However, reports detailing a national energy infrastructure unprepared to cope with a return to service and certainly unable to host the sort of production expansion the country has set as an overall goal have cast doubt on Libya’s production future. Even before being damaged in the violence that halted most energy activity last year, Libya’s energy infrastructure was viewed as out of date and insufficient for modern operations, causing an unrepresentative contribution to global markets despite hosting the continent’s largest proven reserves. Attributed to the country’s economic isolation under the leadership of Muammar Gadaffi, the infrastructure deficit had seen some signs of improvement since sanctions were lifted in 2004, but not nearly enough.

Attracting foreign investors and project partners has emerged as pivotal to Libya’s ability to return to adequately exploit their energy potential, but a series of mixed-messages about requirements has continued to hurt that process. While the country’s transitional government stated energy efforts would favor those firms from countries that had supported their anti-Gadaffi campaign, the actual approach has been more scattered. While both China and Germany did not initially vote in support of international military action in the country, Chinese firms have recently received a series of new contracts while many arriving from Berlin and Frankfurt have found themselves frozen out, according to a recent report in Der Spiegel.

Still, the progress thus far has been heralded by government representatives, like Deputy Minister Omar Shakmak, as proof of the country’s progress, adding in local press reports, that the production return had come with the help of local staff.

“All oil and gas facilities are now being managed by Libyan engineers and workers, a remarkable achievement by Libyan work force which has proved to be well trained and without technical assistance from outside the country,” Shakmak told the Tripoli Post. Shakmak has also told a number of media outlets that he too expects the country to reach 2010 levels by mid to late summer, though with elections planned for June, it’s unclear just how many current leaders will be around to answer for such an estimate.

The minister’s assertion comes as several international firms continue to weigh the risks of the country’s political and security uncertainties and returning their staff and overall presence to pre-conflict levels – a development seen as necessary to helping Libya get production levels back to form.

In addition to questions of overall security and repairs to the country’s energy infrastructure, which experienced damage during Libya’s civil war last year, foreign firms have expressed caution about the country’s political future.

“It is a question of what framework we are going to have. We are waiting for a long-term sustainable situation in the country. How long it would take, I don’t know,” Wintershall Chief Executive Rainer Seele told Reuters. The German firm represents the country’s largest foreign partner until violence forced the company to halt operations at the end of last year. Since returning, Wintershall has tripled production levels since last fall but has said that it could easily reach 90,000 bpd if not for the country’s out of date infrastructure.

Meanwhile, Libya’s largest foreign partner, Italy’s Eni, has steadily worked to return to their pre-conflict production levels after a slight, early misstep when it appeared uncertain whether anti-government forces would succeed in ousting Gadaffi.

When asked about progress last week, Eni press officer Fabio Cesaro stated that since the conclusion of the internal conflict, and the gradual return to political and social normality in the country, “we have stepped up our efforts to fully resume production at our Libyan sites and facilities and gas exports through the Greenstream pipeline on the back of our stable contacts with the Interim Transitional National Council and continued collaboration with the NOC.”

Citing major milestones achieved in the final part of the year, including the restarting of oil production at the Wafa and Bu Attifel fields in September, the reopening of the Greenstream and gas production at the Wafa field in October, and the return to production of the Sabratha gas platform at the Bahr Essalam field in November, Cesaro said the company was aiming to reach pre-conflict goals by the second half of this year.

Still, the country’s overall economic and political uncertainty has kept other foreign firms at bay. Previously, BP press representatives expressed caution to suggesting that they would return when security for all company staff, both foreign and local, could be assured. So far, this level of confidence has not been reached.

Image: Telegraph UK

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Hoping to Leave Challenges Behind, BP Eyes Libya Return

Following a year and a half of political and military delays, BP is poised to pick up where they left off in Libya, joining the roster of international firms hoping to make the most of Africa’s largest proven oil reserves. Despite the presence of many of the same obstacles that put a halt to their efforts in the North African country in the summer of 2010, BP officials remain confident that they will soon be able to achieve the production goals they set out almost five years ago.

The result of a $900 million deal made in 2007, the BP’s Libyan projects were expected to receive more than a billion dollars worth of company investments over the next seven years. The original agreement outlined an exploration project that would cover 54,000 square kilometers of the onshore Ghadames and offshore frontier Sirt basins, allowing for 20 appraisal wells if initial efforts were deemed successful, according to company literature. The company’s Libyan presence would include both on and offshore efforts, allowing for the company’s first projects in the country since 1971 when the new government nationalized all of BP’s assets.

However, those efforts soon came under fire, initially due to allegations that the company had pushed UK political figures to support the release of the convicted Lockerbie bomber, Abdelbaset Al Megrahi in exchange for the new contracts. Facing calls for project delays from both the US and UK, the company worked to calm political waters, but soon found themselves at the center of the year’s largest environmental disaster.  Confidence in the company’s safety record took a hit during the summer of 2010 after the company’s connection to the Deepwater Horizon spill in the Gulf of Mexico spurred a sharp backlash among EU environmental and political groups. The backlash forced a delay in activity, just as BP was concluding a sprawling seismic survey of their offshore licenses. EU political figures began demanding for greater oversight of BP activities in the Mediterranean as well as proof of the company’s capabilities to financially address a possible spill.

However, Lockerbie and environmental concerns took a backseat during the summer of 2011 when Libya’s political environment became too unstable for BP to keep their expatriate staff in place. As anti-Gadaffi forces moved west from Benghazi, followed by the arrival of supporting NATO forces, violence forced a complete halt in production and export efforts, resulting in an evacuation of all international staff by foreign firms.

Now nearly four months after Gadaffi’s death and the recognition of the country’s transitional government as the Libya’s legitimate political leaders by even ardent critics of the anti-government movement, BP is focusing on building their earlier efforts. However, obstacles to a full return remain.

“We are making preparations (we still have just under 100 local staff) to resume our activities but the security situation is still too uncertain,” remarked BP media representative Robert Wine last week. Although members of the transitional government have worked to calm worries about lingering violence, some foreign firms have not reached a level of confidence in the country’s ability to ensure the safety of their workers. Other international firms have been quicker to return to their Libyan efforts, including Spain’s Repsol, France’s Total and notably Italy’s Eni who have come close to reaching pre-conflict production levels.

“We do intend to pick up where we left off, but the circumstances on the ground have to be safe first,” Wine wrote, adding, “Security means safety for anyone working there. Until then, we won’t ask people – not just international staff – to work where it’s dangerous.”

Responding to whether BP foresaw any obstacles to working alongside the country’s transitional government, who have previously offered strong warnings against countries and companies that had previously worked with the Gadaffi government, Wine wrote that he was confident they would be able to work for and with them to fulfill their contracts.

A quick and stable return to Libya may help BP restore some of the investor confidence lost in light of their involvement in the Deepwater Horizon spill and its subsequent lawsuits. Currently facing 600 civil lawsuits from plaintiffs across United States Gulf Region, BP has announced its intention to vigorously fight the cases, though they have allowed that the ongoing legal issues have curtailed interest from investors.

“We have many people who do say, we are interested in investing in BP but not until all this is behind you,” CEO Bob Dudley told a press conference last week, according to the Financial Times.

For now, BP will be able to build upon a return to higher profits with the announcement of $23.9 billion last week, as lower production levels and delayed projects were offset by higher oil prices throughout last year. According to the AFP, the earnings report was accompanied by a higher company dividend, suggesting confidence among company management that any challenges BP faced in the new year were manageable. However, facing a lengthy challenge in US courts, the UK company could likely use all the support it can get.

Image: Arab Money Matters

 

 

 

 

 

 

 

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