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Sun 29 Nov 2009 04:00 AM

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Libya opens its doors to investment

PME meets Libya Oil Minister Dr Shokri Ghanem and discusses the downstream sector

Libya opens its doors to investment
Dr Shokri Ghanem has returned to his position as Libyan energy minister.
Libya opens its doors to investment
Ras Lanuf industrial city is the main hub of the petrochemical industry in Libya.

PME meets Libya Oil Minister Dr Shokri Ghanem and discusses the downstream sector

What is the current oil and gas output of Libya?

Our current oil production is 1.5m barrels per day (bpd) because of the OPEC quota, but the capacity is 2 million bpd and we are working to increase that. We have many programmes where, by the year 2012, it will be 2.3 million bpd and hopefully by the year 2015-2016 it will be around 3 million barrels.

We used to produce 3.2 million barrels per day but it went down because of the embargo. Regarding gas, we are producing about 14bn cubic metres of gas per year and most of it goes to Italy through a subsea pipeline. We also have an LNG plant, but the plan is that we are going to revamp the existing plant. Shell is going to build another gas plant once their gas discoveries prove to be enough for another gas train, also Eni will build another train in the western part of the country. In the downstream we produce 330 000 t/y of ethylene and 160 000 t/y of polyethylene including 80 000 t/y HDPE and 80 000 t/y LLDPE.

What is the investment situation in Libya?

Libya has opened its doors for foreign investments to begin with upstream. There are almost 50 companies working in Libya, all of them are working in exploration and a lot of them have found oil and gas, and of course it needs to be developed. There are also a number of projects in gas as well as refinery projects. It is the same thing for petrochemicals, we are planning a petrochemical complex with Dow, plus the fertiliser project with Yara International which will increase the production of the ammonia and the urea plant here.

What is the situation with the budget for your projects?

There are two ways to consider the budget: The budget of the NOC for example, we are going to invest about $7bn in development this year. Then the oil companies will also invest somewhere between $2bn to $3bn. There are also investments in the expansion and the revamping of petrochemical and gas plants.For the five years ahead we are earmarking $42bn for investments in exploration and development, while in the downstream, we decided to enter into joint ventures with foreign companies, and we are revamping Ras Lanuf and Zaway, and that will cost a few billion dollars.

What is the cost of feedstock in Libya?

There is many ways for this to be calculated, we always need to think in international prices. I am a man who is against subsidies, I hate to see the market distorted, but unfortunately in Libya and most of the oil producing countries, the market is distorted because of the subsidies and the low price of oil products. That is why our consumption is going to be very high and it is going to be a real burden and make the country suffer serious income losses - all because of the subsidies.

What are the major challenges today in Libya?

Hopefully demand will increase and we will continue with our investment plans, because if the oil demand further decreases in the future, which is something I am not expecting, then the income will go down.

And since the the  NOC is a governmental company, the major challenge will be whether we can get enough money from the government to finance our various projects. Financing is very crucial aspect for us.

What is the labour market situation in Libya?

We are trying to Libyanise everything, we are asking all engineering companies to do their work in Libya, to open offices and to undertake all the engineering and the planning in the country. We are also doing a lot of training for Libyans, sending hundreds of them to pursue their post graduate studies and thousands of them to conduct short course training, so building capacity is very important for us.

What incentives does Libya afford to investors?

There is an incentive in taxes, but I am not of the opinion to give cheap prices for any product, as it distorts the market.

Do you find problems for project financing in Libya?

We have a large investment fund that gives project financing. Since [the projects in Libya] are really attractive and economical, I think many banks and financial institution will be very willing to finance.

When will you be signing the Ras Lanuf project JV with Dow?

We are in the final stage but we haven't signed it yet, we have agreed on almost everything almost 95%. It will produce 600 000t/y of ethylene. Our main market is Europe.

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