Libyan leader, Muammar Ghaddafi

© UN / ONU

afrol News, 13 January - During the last five years, Libya has more than doubled its oil export revenues. As more European oil companies are investing in the booming offshore and onshore sector, oil production and the economy at large are certain to grow in the coming years.

In its new, annual analysis of the Libyan oil sector, the US Energy Information Administration (EIA) maps a steady growth. While Libyan oil export revenues were set a around US$ 5.9 billion in 1998, they are expected to reach a total of US$ 12.9 billion in 2004.

The US agency expected this growth to continue, and therefore also foresees a solid economic growth. According to EIA, the Libyan is set to grow by 2.3 percent to 2.6 percent this year. The agency added Libya's gross domestic product grew by 2.7 percent to 3.8 percent in 2003.

The figures however may seem too conservative and the calculations were probably made before the thawing of European-Libyan relations were a fact. Actually, European investments are now booming in Libya.

The timing for European investors is good. It is again politically correct to invest in Libya, European governments again give export loan guarantees, the Libyan government still warmly welcomes investors and the American are still barred by their own government from competing over the most lucrative investments. Libya is considered a highly attractive oil province due to its low cost of oil recovery, its proximity to European markets, and its well-developed infrastructure.

In particular Italian companies have used the possibility to strengthen their position in Libya. Sub-contractors of Eni (formerly Agip) only in November won contracts in Libya totalling US$ 1.38 billion. This included the award of two major contracts offshore Libya for the construction of a gas pipeline linking Libya's coastal town Mellitah to Sicily and two pipelines linking Mellitah to the Sabratha offshore platform.

New European investments in Libya are a daily event. Only today, the Croatian company Crosco announced it was to "provide drilling services for Agip Oil in Libya." Crosco's Engineering and Machinery Manager, Branko Franolic, said the Zagreb-based company was "pleased" to enter into the Libyan market.

Overall, the Libyan government is seeking foreign company help to increase the country's oil production capacity from 1.4 million barrels a day (bbl/d) at present to 2 million bbl/d by 2010. In order to achieve this goal, and also to upgrade its oil infrastructure in general, Libya is seeking as much as US$ 30 billion in foreign investment through 2010, according to EIA.

If Libya does reach 2 million bbl/d in oil production capacity, this would take the country back to a level it has not seen since the late 1970s. During that decade, Libya's revolutionary government imposed tough terms on producing companies, leading to a slide in oilfield investments and oil production - from 3.3 million bbl/d in 1970 to 1.5 million bbl/d in 1975, before rising again to 2.1 million bbl/d in 1979.

During the 1980s, Libyan oil production averaged around 1.2 million bbl/d, rising to around 1.4 million bbl/d in the 1990s. The September 2003 lifting of UN sanctions - along with possible changes to Libya's 1955 hydrocarbons legislation - could be helpful in boosting the country's oil output.

According to the EIA analysis, sanctions had caused delays in a number of field development projects and had deterred capital investment to an extent. The full lifting of sanctions means that Libya now can resume purchases of oil industry equipment. "However, US sanctions remain in place, which is important since US companies are leaders in advanced oil and gas technologies, many of which they have under patent," EIA notes.

By staff writer

© afrol News

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