Operators plan more drilling after third Libyan bid round

Feb. 5, 2007
Operators committed to drilling at least 35 new exploration wells under successful bids in Libya’s third round.

Operators committed to drilling at least 35 new exploration wells under successful bids in Libya’s third round.

Libya has the largest oil reserves in Africa (39 billion bbl) and is the eighth-largest oil producer among the members of the Organization of Petroleum Exporting Countries (OPEC). Libya wants to increase oil production to 2 million b/d by 2008-10 and to 3 million b/d by 2015, from 1.6 million b/d today.

Since 1961, Libya has produced high quality, low-sulfur, sweet crude oil, primarily sold into the European market. The country is now the second-largest oil supplier to Europe. Libya’s National Oil Corp. (NOC) set up subsidiaries with offices in Europe:

  • Umm Al-Jawaby Oil Service Co. Ltd. in London, 1983.
  • Mediterranean Oil Services GMBH in Düsseldorf, 1988.
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Since the US lifted economic sanctions against Libya in 2004, NOC has reinstituted lease sales, which are again attracting the attention of many international players as well as national oil companies looking to diversify assets abroad.

Rig counts

From 1982 to mid 1986, there were 18-34 land rigs and as many as 2 offshore rigs drilling in Libya (Fig. 1). Drilling began to tail off in the mid-1980s, and rig counts have hovered between 10-15 over the last 20 years. The majority of the drilling has focused on oil, rather than on natural gas.

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According to Baker Hughes International rotary rig count, there were 12 land rigs drilling in Libya in December 2006, up from 11 in November 2006 and 9 in December 2005. The BHI count is a snapshot that includes only rigs actually drilling (“turning to the right”) as opposed to the total number of rigs on site and under contract.

A single mobile offshore rig, the Pride North Sea, a second-generation semisub, was drilling off Libya but moved west, to Tunisia to drill for British Gas Tunisia Ltd., the largest producer of gas in Tunisia. The Pride Venezuela, a third-generation semisub, had previously drilled off Libya for Eni SPA.

There are three noncompetitive platform rigs busy with workovers in Libya’s offshore Bouri field, all managed by KCA Deutag and owned by Agip: Bouri DP-3, DP-4A, and DP-4B.


Libya’s National Oil Corp. recently announced results of the third bid round in the country’s EPSA 4 (exploration and production-sharing agreement) program.

Unlike the EPSA 3 program, which required negotiations with the Libyan government, EPSA 4 is based only on competitive bidding.

In Round 1 results, announced in January 2005, US-based firms won 11 of the 15 available leases.

The National Oil Corp. opened bids Oct. 2, 2005, for Round 2 of EPSA 4. Fifty companies bid on 40 of the 44 blocks offered (OGJ, Oct. 24, 2005, p. 39). Based on the bidding for leases covering an area the size of Switzerland, the NOC selected 19 companies to receive licenses for five onshore basins and some offshore areas.

Second round winners included:

  • Eight Asian companies: Nippon Oil Corp., Mitsubishi Corp., Japan Petroleum Exploration Co. Ltd. (Japex), Inpex Corp., and Teikoku Oil Co. Ltd. (OGJ, Oct. 10, 2005, Newsletter); PT Pertamina; Chinese Petroleum Corp.
  • Six European companies: Total ASA, Norsk Hydro AS, Statoil ASA, BG Group PLC, Eni North Africa, and OAO Tatneft.
  • Three Indian companies: Oil India Ltd., Indian Oil Corp. Ltd., and ONGC Videsh Ltd.
  • Turkish Petroleum Overseas Co. Ltd.
  • ExxonMobil Libya Ltd.

The average share of production that companies allotted themselves fell to 13.2% in the second round from 19.5% in the first round.

Third, fourth bid rounds

Libya solicited bids in mid-2006 for its third bidding round (OGJ, Sept. 4, 2006, p. 53). This is the first bidding round under Libya’s new oil chief, Shokhri Ghanem, chairman of National Oil Corp.

The acreage on offer covered 41 blocks in 14 exploration areas across the Murzuq, Sirte, Ghadames, Kufra, and Cyrenaica basins, as well as the offshore sector. Most of these areas are relatively untested, with only 9 onshore wells and 1 offshore well in the areas on offer.

The bids were opened Dec. 20 in Tripoli; competitive winning bids were announced that day. Operators did not bid on four of the onshore exploration contract areas: Kufra basin Area 196 (Blocks 2 and 4); Cyrenaica basin Area 57 (Blocks 1-4), Area 59 (Blocks 1 and 2), and Area 77 (Blocks 1-4).

New York-based Barrows Co. Inc. characterized Russian firms OAO Tatneft and OAO Gazprom as the “big winners.”1

According to a summary of the winning bidders on the Libyan NOC website, Tatneft won licenses for three contract areas (Ghadames and Sirte basins) and Gazprom won a license to explore offshore Area 19 (total $40 million bonus). Taiwan’s Chinese Petroleum Corp. (CPC), Germany’s Wintershall AG, and a partnership of Petro-Canada and Repsol YPF took one license each (total $18 million bonus).

These companies specified production shares ranging 7.8%-18%, committed to drill 27 wells, acquire 19,100 km (2D) and 4,500 km (3D) seismic data, and pledged signature bonuses totaling $58.1 million (Table 1).

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Three single bids by ExxonMobil Libya Ltd., ONGC Videsh Ltd., and Inpex Corp. were held until a meeting on Dec. 24 and subsequently approved by the NOC management committee. The production share is higher on these three licenses than the competitive group: 22.3% and 28% for offshore areas and 12.9% for the onshore Murzuq basin. These three bids include 22,000 km (2D) and 5,500 km (3D) seismic, 8 wells, and $30 million in signing bonuses (Table 1, italicized lines).

The total work commitment arising form the third bidding round is 41,100 km (2D) and 10,000 km (3D) seismic and 35 exploration wells.

E&P-sharing agreements (EPSA) were scheduled to be signed in January 2007.

Following the opening of bid in the third round on Dec. 20, Libya’s National Oil Corp. announced that a fourth bid round would be held in first-quarter 2007 with “the focus on gas.”

Drilling contracts

Although drilling contracts in Libya had tended toward short-term in recent years, there has been a shift toward longer term day-rate contracts due to the shortage of suitable rigs. There is no indication of any turnkey drilling contracts in Libya at this time.

A new drilling challenge is the NOC’s emphasis on discovering and developing gas reserves, after 45 years of exploration dedicated toward oil.

On Dec. 15, KCA Deutag, a wholly owned subsidiary of Abbot Group PLC, announced mobilization of its 3,000-hp T-202 rig from Bangladesh to Libya, to begin a 3-year contract in December 2007 with a major international operator to drill deep exploration and appraisal wells for potential gas reserves.

Rig fleets

KCA Deutag, a subsidiary of Abbot Group PLC, has worked in Libya for more than 40 years and is the largest western-owned drilling contractor in country, working for state-owned Waha Oil Co., Italy’s Agip, Wintershall Libyen Oil & Gas GMBH, Arab Oil Gas Co., Germany’s Veba Oil Co., Canada’s Verenex Energy Inc., and Repsol Exploracion Murzuq SA (REMSA) through its ILI Corp. office in Tripoli.

KCAD had five rigs working in Libya before Abbot Group acquired International Air Drilling Co. Ltd. in 2004; IADC had a fleet of 10 workover and drilling rigs in country. Two newbuilds were added to its Libyan fleet in 2005.

The company now has 17 land rigs in Libya and will add an eighteenth rig in third-quarter 2007. The KCAD fleet includes:

  • 12 rigs under 1,000 hp-3 Cabot 320; 7 Cabot Franks; 2 Sandmaster.
  • 5 rigs 1,000-2,000 hp-1 EMSCO A-800; 1 National 1320 UE; 3 Ideco ED-1200.

Two of the rigs drilling in Libya are Sandmaster desert rigs, the T-107 (Sandmaster K650, contracted to Veba Libya); and the T-108 (Sandmaster K750; contracted to REMSA Libya, a subsidiary of Repsol YPF). A third drilling rig, the T-16, is contracted to Agip Libya (Fig. 2).

KCA Deutag has been drilling in Libya for more than 50 years. The T-108 rig at left, a Sandmaster K750, is contracted to REMSA Libya, a subsidiary of Repsol YPF. The T-16 Emsco rig at right is contracted to Agip Libya (Fig. 2; photos from KCA Deutag).
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In late December, KCA Deutag announced new drilling contracts for Libya, including:

  • A $45 million, 3-year contract to commence December 2007, with options to renew, for its 3,000-hp T-202 land rig, which will be mobilized from Bangladesh.
  • A well-to-well contract with Veba Oil for the 700-hp workover rig T107, which is estimated to continue for 1 year.

In January 2006, Nabors Industries Ltd. received a term contract to run a new PACE rig in Libya for Occidental Petroleum Corp. (Fig. 3).

Nabors F-16 is a new 1,500-hp, Chinese-built PACE rig currently drilling in Libya for Occidental Petroleum Corp. (Fig. 3; photo from Nabors Industries Ltd.).
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Drilling contractor Challenger Ltd. was established in 1991 and began drilling for the Arabian Gulf Oil Co. in the Sarrir field. In 1993-94, Challenger drilled in Wadi Borjuj for London & Scottish Marine Oil Co., and in 1994 at El Zahra for Waha.

Challenger has two offices in Libya, at Benghazi and in Tripoli, and a fleet of 25 rigs, including 8 rotary drilling rigs, 5 workover rigs, and 12 water well drilling rigs.

Tripoli-based Arab Drilling & Workover Co. (ADWOC), a subsidiary of Arab Petroleum Services Co., has a fleet of drilling and workover rigs in Libya.


Various international service companies have used some of their newest technologies in Libyan fields.

Weatherford Libya Ltd. successfully used its MetalSkin solid expandable system to isolate a casing leak on a producing oil well in Messla, Libya. It successfully ran a noncemented cased hole liner without losing internal diameter.

According to Weatherford’s Hani Qutobl and Anass Al-Chalabi, the company has also provided underbalanced reservoir drilling and controlled pressure air drilling services in Libya.

Weatherford’s completion and production services group has a long-term supply and service agreement with Compagnie des Petroles Total Libye (CPTL) for electric submersible pump (ESP) installations.

Weatherford also set an extended-reach setting depth record to 15,569 ft offshore Libya using the Revolution rotary steerable system for CPTL.

In April 2006, BJ Tubular Services Co. announced its first contract to work in Libya providing services on a number of offshore wells for CPTL. BJ is providing hammer conductor-driving services and conductor cold-cutting services on the BD1 platform in Al Jurf field. BJ is using Zone 1 cold-cutting equipment and its S90 Hydrohammer hydraulic pile driving system to drive conductors.


Germany’s RWE Dea AG is committed to drilling at least 10 exploration wells on 6 license areas, following an extensive seismic acquisition program. The company discovered 35° gravity oil in its first well, the A1-NC-193, it announced in late October 2006. RWE used the Adwoc Rig 2 to drill the 4,214 ft well in the Sirte basin, about 500 km southeast of Tripoli (OGJ, Nov. 6, 2006, p. 8).

Total has been active in Libya since the 1950s, operating the offshore Al Jurf field and Mabruk field in the Sirte basin. Totla also has a working interest in the consortium operating El Sharara field in the Murzuq basin. In July 2006, Total announced a new discovery at the D1 well in Area NC 191 of the southern Murzuq basin, about 800 km south of Tripoli.

In late December 2006, Verenex announced that it had completed drilling its first Libyan well, under a three-well commitment for the Contract Area 47 license. The A1-47/02 well reached TD at 11,550 ft and showed oil and gas in the Lower Acacus formation (9,010-10,062 ft) and Memountiat formation (near TD). Completion and production testing began in January.

Going forward

We can expect to see new contracts for seismic acquisition in Libya, data processing, and new drilling required under the 5-year EPSA 4 licenses issued in bid rounds 1, 2, and 3. Round 4 will be announced in February or March 2007.

Meanwhile, operators continue work in older fields they have recently regained. ConocoPhillips plans ongoing development of its Waha concession. Statoil inaugurated its office in Tripoli on Dec. 11, 2006.

Peter Mellbye, executive vice-president for Statoil’s international exploration and production business area, said in 2006, “The Libyan government’s approval of our contracts [Dec. 10, 2005] represented a milestone. This marked the start of Statoil’s operatorship of a 5-year exploration program in two licenses. The goal is to discover oil and gas resources which can form the basis for a long-term presence in Libya.”


  1. Text of Libya’s petroleum laws and the EPSA IV model contract published at www.barrowscompany.com.