Patience, persistence preceded Elephant discovery in Libya

May 17, 1999
A rig drills for a Lasmo group on Block NC174 in the Murzuk basin about 1,000 km south of Tripoli. Lasmo Group's drilling on Libya block NC174 [96,904 bytes] F field base Silurian [61,256 bytes] The well that Lasmo plc explorers deemed to be the least likely in the 1997 program to succeed is the well that discovered a 500 million bbl oil field on the Elephant prospect in the remote Murzuk basin. Substantial opportunities exist for oil and gas companies in Libya, said Mike Buck, business
G. Alan Petzet
Exploration Editor
A rig drills for a Lasmo group on Block NC174 in the Murzuk basin about 1,000 km south of Tripoli.
The well that Lasmo plc explorers deemed to be the least likely in the 1997 program to succeed is the well that discovered a 500 million bbl oil field on the Elephant prospect in the remote Murzuk basin.

Substantial opportunities exist for oil and gas companies in Libya, said Mike Buck, business managing director, Lasmo Grand Maghreb Ltd. Buck addressed a conference on Libya in Geneva last month.

North Africa, 10 years a focus for Lasmo, has become a core area. Beyond Libya, the company operates a reconnaissance license in Morocco, is a participant in eastern Algeria's prolific Berkine area, and is involved in exploration in southern Tunisia.

Lasmo conducts E&P activities in Libya with a Korean consortium, AGIP North Africa BV, and Libyan National Oil Corp. Buck said Lasmo's dealings with NOC, while sometimes subject to lengthy delays, have been sound and professional "with politics playing no part."

Lasmo plans to start production from F-NC174 field by yearend 2000 and places development capital expenditures at about $1/bbl.

The text and illustrations of Buck's talk are posted on Lasmo's website, lasmo.com

Exploration history

Lasmo entered Libya in late 1990, joining a Korean consortium and becoming operator of Sirte basin offshore Block NC173 and Murzuk Block NC174. Farmouts on three onshore Sirte blocks resulted in early relinquishment.

During the 1990s, Lasmo participated in nine wildcats, eight onshore of which seven were Lasmo operated, and one operated well offshore.

Lasmo and partners were disappointed after four wildcats resulted in two subcommercial discoveries, one well with shows, and one dry hole. However, they decided to continue exploring the highly ranked acreage despite a worsening political situation and UN sanctions.

With contracts amended and Agip signed on, Lasmo drilled a wildcat off Benghazi in 1966 and three wells on Murzuk Block NC174.

The sixth exploration well on the block, F1-NC174, found a field with reserves now estimated to exceed 500 million bbl.

"In spite of the F-NC174 success, the results of Lasmo's seven exploration wells on the block demonstrate that the petroleum system in the Murzuk basin is not as simple as it might appear," Buck said. "There still remains considerable uncertainty surrounding the prediction of good quality reservoir, the distribution of source rock, and the charging of structures."

The more than $130 million that Lasmo and partners have spent since 1990 is to be recovered when F-NC174 field comes on stream.

Sanctions and logistics

Lasmo operated in isolation in Murzuk, more than 600 miles from oil infrastructure and contractor support in eastern Libya.

Rough terrain, remoteness, and harsh climate (just north of the Tropic of Cancer) "made operating to Lasmo's high health, safety, and environmental standards a major challenge," Buck said.

Exploratory well costs are halved from the initial $5 million.

The U.K. and Libya had no diplomatic relations when Lasmo began work.

Exclusion from Libya of certain oilfield contractors due to the sanctions limited competition and resulted in higher prices for equipment and services. Restrictions on certain equipment and technologies led to inefficiencies, waste, and less than ideal solutions to problems, Buck said.

Considerable effort, communication, and cooperation with relevant authorities were necessary to ensure full compliance in funding the Libyan activities.

The road-air journey between Tripoli and London via Tunisia entailed considerable inconvenience and heightened risks. This and the limitations on air transportation within Libya made the maintenance of Lasmo's required operational health and safety standards at its remote drilling sites a major challenge.

On the positive side, Lasmo benefited from the former close ties between Libya and Britain.

NOC is a regulator and E&P partner with an excellent record for honoring commitments, Buck said.

Elephant operations

The F-NC174 discovery well cut about 100 m of oil pay in excellent quality reservoir sands with average porosity of 16%. DSTs from below 5,000 ft aggregated 7,500 b/d of high quality, 38° gravity sweet crude.

Lasmo then drilled four appraisal wells and acquired 265 sq km of 3D seismic data. It declared the field commercial in February 1999 and is working toward first deliveries by late 2000.

"Downhole problems thus far appear minor when compared to those to be overcome at surface," Buck said.

More than half of NC174 is a boulder field. Steep-sided wadis dissect the plateau. The black rock plateau terminates on its northern side in a 300 m cliff, with the field on the high side of the cliff.

The export pipeline to El Sharara A field will have to traverse this escarpment, which forms an unbroken, 120 km barrier across northern NC174. Target production is 50,000 b/d from 7-8 wells in 2001-2002 and an eventual 150,000 b/d from 30 wells from 2002.

Contract terms

Lasmo is looking to expand its portfolio in Libya. Buck encouraged NOC and the Libyan secretariat of energy to move ahead swiftly with a licensing round.

He urged simplification of the pipeline tariff and modification of legislation that limits tubing size to 31/2 in.

He noted that Barrows Inc. of New York ranked the Libyan EPSA3 production sharing contract terms 251st out of 324 systems analyzed.

The blockwide ring fence provision, beneficial to explorers in some respects, is bad for host and explorer if it erodes significantly the economic incentive to continue exploring once a discovery is made, he reasoned.

EPSA3 terms insulate a foreign investor somewhat from very low oil prices and isolate him from the benefits of a large find or a price rise, and the ratio merits some review, Buck said.

Copyright 1999 Oil & Gas Journal. All Rights Reserved.