Oil Production & Operational Policies in Libya

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Table of Contents

Background
Operational Polices With Global Societal Impacts
References

Background

The hydrocarbon industry forms the back bone of the Libyan economy. It is estimated by the IMF that contributed to about 95% of export earnings in Libya in 2010 (Country Analysis Briefs, 2011). The oil and gas journal (OGJ) has approximated Libyas oil reserves to be about 46.4 billion barrels, the largest in the African continent.

In 2010, it is estimated that the total oil production was about 1.8 million barrels per day. A majority of the oil in Libya (about 80%) is in Sirte basin. 25% of total oil production is from Murzuq basin and the remaining largely comes from Pelagian Shelf Basin (Country Analysis Briefs, 2011).

Sector Organization

The Oil industry is run by state owned National Oil Corporation (NOC) which implements Exploration and Production Sharing Agreements (EPSA) with international oil companies (IOCs) such as Total, Repsol YPF, Statoil Hydro, Occidental, OMV, ConocoPhillips, Hess, Marathon, Shell, BP and Exxon Mobil. NOC also engages in field development and downstream activities (Country Analysis Briefs, 2011).

Production and refining

Libyas oil production has been on the decline despite hitting 3 million barrels per day (bbI/d) in 1960s. Despite the decline, crude oil has increased from 1.4 million bbl/d in 2000 to 1.8 million bbl/d in 2010. There are about 5 refineries with a total capacity of 378000 bbI/d.

These include Ras Lanuf-crude oil capacity of 220,000 bbl/d; Az Zawiya -120,000 bbl/d; Tobruk -20,000 bbl/d; Sarir, 10,000 bbl/d; and Brega 8,000 bbl/d (Country Analysis Briefs, 2011)..

Challenges Facing Oil Production

Civil war and a decade of the United States and international sanctions have affected oil industry.These include sanctions by the United States and the United Nations in 2003 and 2004.

Since sanctionS were lifted, Libya has been the target of international oil companies which boosted oil production even despite uncertainties in terms of regulations and renewal of contracts. However, government plans to increase oil production were slapped by the USs designation of Libya as a state sponsor of terrorist activities in 2006 and the civil war (Country Analysis Briefs, 2011).

Operational Polices With Global Societal Impacts

Oil companies in Libya are usually locally or globally subjected to operational policies which have global societal impacts. Such policies are geared towards environmental protection (Wawryk, 2010). For example IOCs operating in Libya that are members of other bodies and are subjected to laws and best practices to improve health, safety and environment globally.

On a global perspective, the International Association of Oil and Gas Producers (OGP) have guidelines and standards with a global societal impact. Other operational policies may include those of NGOs, IGOs, World Conservation Union, (UNEP), World Bank and the international chamber of Commerce (Wawryk, 2010).

Operational policies tend to address vulnerability to disruption and higher prices and the effects can be long-term. This is because material shifts in the energy sector takes time either through efficiency, renewable or increased oil and gas production.

Policy options which are short-term (unlike wider national security and diplomatic issues) are limited. Oil exporters like Libya with alternative production capacity are bound to take short-term decisions in an attempt to moderate prices through product-level-adjustments, but this ability is determined by internal decisions (Country Analysis Briefs, 2011).

Other operational policies with global impacts are from within the Libyan government. For example participation of IOCs in oil concessions was previously at 49% which was reduced due to changes in oil production and sharing agreements under EPSA.

The IOCs were under obligation to rewrite contracts in an attempt to comply NOCs demands. This created uncertainty in the contractual arena and reduced oil exploration, despite the global need for oil (Country Analysis Briefs, 2011).

References

Country Analysis Briefs, (2011). Energy information administration. Retrieved from <https://www.eia.gov/beta/international/analysis_includes/countries_long/Libya/libya.pdf>

Wawryk, A. (2010). International environmental standards in the oil industry: improving the operations of transnational oil companies in emerging economies. University of Adelaide: University of Adelaide Press.

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