Libya's oil licensing bids could be delayed again

Minister of oil has said Q1 2014 for the bids, but will that happen?

Libya Oil laws are being redrafted and IOCs want to see substantial benefits in resuming operation.
Libya Oil laws are being redrafted and IOCs want to see substantial benefits in resuming operation.

Libya's Minister for Oil Dr. Abdulbari Ali Arousi has said that the country's much anticipated licensing rounds will be held in the first quarter of 2014.

The rounds which are intended to promote further development of Libya's hydrocarbon reserves, have been delayed from 2013 to 2014 due to the difficult nature of Libyan politics.

But a report by GlobalData has suggested that the rounds could be delayed ever further, depending on the progress of related legislation through the General National Congress, which has just elected a new chairman.

Recent specualation has suggested that the new rounds may see an easing of fiscal terms as authorities try to attract new investment from International Oil Companies, the report says. But one GlobalData analyst has also warned that the nation's government cannot afford to be overly generous to foreign players.

According to the report, changes to existing contracts have been ruled out, but the Ministry has said that it is in discussions with existing license holders on how future contracts can be improved.

Rabie Khellafi, GlobalData's legad analyst for the MENA region, pointed out that it is unlikely that legislators will cut government revenue from the oil and gas industry in the current climate, particularly given their status as recently elected representatives in a region where populations tend to favour domestic control of resources.

Alongside the wider political transition in progress following the downfall of the Ghadaffi regime, a new oil and gas law is being drafted in preparation for the new bidding round, and the underwhelming outcome of exploration at the blocks licensed in the most recent rounds has set certain expectations for future fiscal terms.

"Many exploration blocks were relinquished having found no commercial reousrces and dispapointment was compounded by the fact that contractual terms were tough.

"IOCs are likely to lobby for improvements to fiscal terms for the forthcoming licensing round, through measure to increase available rewards and to get a better acreage," says Khellafi. "Limitations on the initial share of production due to the National Oil Company, would increase the levels of production from which IOCs can recover costs and earn profit."

Despite the decline in recent substantial discoveries, the persistent attractiveness of Libya's resources combined with the nation's dependence on hydrocarbon revenues may thward any attempts to win big concessions from the govenrment.

The country's geological basins are proven producers of both oil and gas and the sector accounts for 65% of Libya's GDP and 96% of the country's government revenue much of which is being spent on rebuilding the war-torn country and paying the growing payrolls of the country's militiamen.

"One reason why recent fiscal terms were so tough, is the competitiveness of the bidding after two decades of underexploration of a country with a proven potential," says Khellafi. "The rapid return of IOCs to the country following Ghadaffi's downfall shows that the country is still important and tthat the oil and gas potential outweighs security considerations."


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