Libya: A Non-Russian Energy Lifeline for Europe

A spokesperson for BP said Feb. 4 that the Libyan government ratified a $900 million natural gas exploration agreement with BP on Jan. 29. The deal, originally signed May 29, 2007, gives BP permission to drill 17 exploration wells across an area of 13.3 million acres in the area around Ghadames and in the offshore Sirte basins. BP's exploration efforts could make Libya, already a major oil exporter, one of the top exporters of natural gas to Europe. Libya's geographical proximity to Europe (the Sicilian coast is less than 300 miles from Tripoli) and sound infrastructure make the country's export potential obvious. Currently, Libya trails far behind former Soviet Union countries, Algeria, Norway and Nigeria in terms of natural gas exports to Europe — it exported a mere 911 million cubic meters in October 2007. However, Libya's combined exports for January 2007 through October of the same year represent an 18.9 percent increase over the same period in 2006, showing potential for further growth. Libya's infrastructure also points to a future increase in natural gas exports. The country's $6.6 billion, 370-mile Greenstream underwater natural gas pipeline to Italy came on line in October 2004. Libya also has an old liquefied natural gas facility at Marsa El Brega that has languished without technological updates for more than 40 years (because of sanctions) and runs at 15 percent of nameplate capacity. Royal Dutch/Shell signed a deal in May 2005 to update the facility and possibly build a new one. Libya's export infrastructure is waiting for exploration efforts to catch up; such efforts were largely stalled in the 1970s, when Gadhafi nationalized the energy industry. The deal with BP — which left Libya in 1971 after its assets were nationalized — allows Tripoli to fulfill its potential as a major natural gas exporter to energy-starved Europe. It also allows Europe to further diversify its energy imports, thus decreasing its dependence on Russia and Central Asia, where fields are maturing anyway. The deal with BP also is another signal from Gadhafi that his recent openness is more than just a public relations campaign. Obviously BP's exploration efforts still need to lead to discoveries and then actual production and exports. The key point, however, is that things are finally moving in Libya.