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In 1970 Libya produced 3.3 million barrels of crude oil a day, but since then output has fallen massively, mainly as a result of US sanctions levied against the country due to accusations that Qaddafi was supporting terrorists. The highest production volume in recent years was 1.8 million barrels a day in 2008, and currently it is down to just 200,000 – 240,000 barrels a day.
In 2004 the US lifted the sanctions, and in an attempt to greatly boost output Libya has held a number of exploration auctions, trying to attract foreign investment and force further exploration and development of crude oil resources. Between 2005 and 2007 nearly 30 companies (including Eni SpA, Royal Dutch Shell Plc, Exxon Mobil Corp., Repsol SA,Total SA, and OAO Gazprom) have won exploration and production licenses from four different auctions.
Recent protests in Libya’s oil industry risk to deter any foreign oil companies from bidding in the auction, so as an extra incentive the government is reassessing the terms it offers. The next auction is planned for next year, and will be first since the removal of Qaddafi in 2011.
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Nuri Berruien, the chairman of state-owned National Oil Corp., explained that “the conditions are under review so as to improve relations with the companies in a win-win context and promote long-term investments.”
Previously terms offered where only just competitive, but now Riccardo Fabiani, a North Africa analyst with Eurasia Group, has explained that “the international oil companies were attracted mostly to the fact that Libya was relatively under-explored after decades of international sanctions and isolation, and therefore the potential was considered high.”
Najmi Karim, the chairman of Libya’s petroleum law review committee, stated that they “will seek to reward risk,” by offering better terms to companies exploring in more remote and dangerous areas.
On Monday the government managed to negotiate an end to the strikes at the Sharara and El Feel fields increasing Libya’s oil production by 400,000 a day.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com