As it restarts three major export facilities, Libya’s National Oil Company has chastised Shell for what it regards as the company’s poor record in the country.
“Historically and since its entry to Libya, Shell has generally not achieved encouraging results in either the exploration or the production of oil and gas,” the NOC said in a statement on its website yesterday, translated from Arabic.
The statement came as NOC announced that the oil export terminals at El-Sider, Ras Lanuf and Brega, with a combined capacity of 690,000 bpd, had restarted. The terminals were taken offline during Libya’s historic election by protestors who believe that the East of the country will be underrepresented in Libya’s new parliament.
In late May, Shell ended its current operations in Libya, amid concerns over security and the economic viability of further investment.
The news put a rare blot on the country’s upstream landscape after an expectations-defying return to near pre-war levels of production and optimism that the next political administration will not have the kleptocratic approach to the oil industry as the fallen Gaddafi regime.
Shell “intends to suspend and abandon drilled wells and stop exploration in [its] Libyan licenses […]results [prior to the war] have been disappointing and further exploration cannot be economically justified,” a company spokesman told Dow Jones in May. In-country staff have reportedly been laid off. Shell says it will continue to have a presence in the country with a representative office.
The NOC says Shell has ceased activity in Libya without giving prior notification, and expressed frustration at Shell’s declaration, saying 15 companies and one joint venture project have restarted operations in Libya’s upstream sector since the end of the country’s revolutionary war.
The state firm also said Shell’s exploration results in Libya do not reflect the strength of the assets awarded to the company.
Shell was not immediately available for comment.
Shell holds interests in the Area 89, NC211-215, NC211-C and NC212 blocks onshore Libya, and was drilling two wells in the country before the civil war last year. The company also has a forestalled LNG development agreement (LNGDA) agreement from May 2005.
The LNGDA covered three stages in developing Libya’s LNG capacity: the exploration for gas across five blocks in Libya’s Sirte basin, the rejuvenation of an existing LNG plant at Marsa El Brega and, conditional on commerciality, an upgrade of the Brega LNG plant to bring its production level back to its original nameplate capacity of 3.2 million tonnes per annum (mtpa) of LNG.
An ancillary agreement for the $643 million rejuvenation of the Marsa El BRega plant to a capacity of 120,000 barrels of oil equivalent a day from 35,000 boe/d was signed by the parties on 15 January 2008.
The LNGDA also provided for the eventual construction of a brand new $2-3 billion world-scale LNG plant.
The NOC statement says Shell “did not achieve the company’s the target of their commitments for exploration activity or in terms of modernizing the gas plant,” pulling out of the latter in 2010.
Global gas markets have change significantly since the signing of the LNGDA in 2005, with the advent of shale gas in the US and the more than doubling of Qatari LNG exports.
