Libya has identified itself as fertile and welcoming soil for a budding strategy among Canadian producers of replacing their deteriorating fields by developing liquefied natural gas (LNG) abroad for tanker shipments back to North America.
“We are planning for sizeable investment into the gas business,” Libyan National Oil Corp. executive Tarek Hassan-Beck said in an interview. “We’re encouraging people to come for exploring and exploiting gas.”
International industry is showing it pays to tap gas in Libya for long distance delivery to western markets, said Hassan-Beck. As the state energy company’s planning and information technology director, he toured Alberta for a week to spread the word: Libya is open for business and profitable, he said.
“We know the liquefied natural gas market is very lucrative in North America,” he said. The knowledge was confirmed when Royal/Dutch Shell made a deal in March to do US$200 million in gas drilling in Libya and then develop its discoveries for LNG tanker shipments, he pointed out.
Construction is under way on a $5 billion project to supply Europe with new Libyan output via a 300-kilometer pipeline under the Mediterranean Sea to hook up to the European gas grid in Sicily. Plans are afoot to double production to 1.6 Bcf/d soon after deliveries start early in 2005, Hassan-Beck said.
He said the project went ahead because its economics were sound at gas prices in the range of $2 to $3/Mcf, in Europe or less than half the current range of $5 to $6 on tight markets across Canada and the United States.
He urged Canadian firms to expand their toehold in Libya, saying exploration and production companies are welcome to take their Alberta supply and service contractors into the country for projects.
“We’d like to help and pave the way for Canadian companies in all aspects of our operations. It’s going to be very rewarding,” Hassan-Beck said.
Petro-Canada leads the pack after acquiring production and 10,100 square miles of drilling concessions in Libya with its $2.4 billion takeover of Germany’s Veba Oil & Gas in 2002. Petro-Canada has since acquired additional Libyan acreage EnCana Corp. has done inconclusive early exploration. Talisman Energy Inc. is showing interest.
Petro-Canada recently told its shareholders it is working on a strategy of developing gas supplies overseas in order to replace dwindling sales from Alberta with LNG shipments to the U.S. The company reported encouraging results from a 17% minority interest in a production project operated by British Gas in Trinidad and Tobago. The development, known as North Coast Marine Area 1, began deliveries under long-term contracts as of Jan. 1.
Although gas is a new field for Libya as a member of the Organization of Petroleum Exporting Countries that has to date dedicated its industry to oil, unintended discoveries have proved up supplies on the scale of Alberta’s remaining reserves.
Libya’s proven reserves include 54 Tcf of gas as well as its 36 billion barrels of oil. But only about 25% of potential drilling targets in seven prospective geological basins have been well explored.
Hassan-Beck said OPEC has not yet discussed trying to manage world gas supplies in the same way it sets quotas on oil production. But he did not rule out the possibility of such a move as LNG exports grow. “We’d love to get more for our gas if we can.”
In the Canadian embassy in Tripoli, deputy ambassador David Viveash said “Libya’s an important frontier for the Canadian oil and gas industry.” The country is bound to attract increasing interest as the Libyan government’s renunciation of terrorism puts an end to its decades of international isolation.
He said “a real dialogue” is developing after Alberta firms figured prominently in a Canadian trade mission to Libya during December. Libyan leaders are expected to pay another call on Alberta in June, during the industry’s biennial Global Petroleum Show.
Reports from the National Energy Board and the Canadian Gas Association, meanwhile, again highlighted the depletion of aging Alberta natural gas fields.
Canadian pipeline exports to the U.S. dropped by 8% in 2003 to 3.5 Tcf compared to 3.8 Tcf in 2002, an NEB statistical report said. The association, voice of gas pipelines and distribution firms, called for a concerted effort by the production industry and regulators to ensure there is new supply development to relieve upward pressure on prices.
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