Libya - Reserves Second To Saudi Arabia ?  

Posted by Big Gav

A few of you (FTD, Energy Bulletin) have linked to NPR's recent broadcast discussing the opening up of the Libyan oil industry, which included the juicy quote "geologists dream of reserves second to Saudi Arabia".

Ianqui at The Oil Drum comments:

People are hoping that Libya's reserves are second only to Saudi Arabia. According to the DOE, Libya has proven reserves of 39 billion barrels, but "Libya remains 'highly unexplored' according to Wood Mackenzie Consultants, and has 'excellent' potential for more oil discoveries." Currently, Libya is pumping 1.4 mbd, and hopes to get to 2 mbd by 2010. Furthermore, most of their reserves are sweet crude.

Since Libya has essentially been on hold for 18 years, they're desperate for American know-how and they're hoping American oil companies will be lured in by the promise of riches. Right now, they have infrastructure dating back to the 80s, and no money, anyway (they need $30 billion to ramp up to the production levels they're hoping for). However, Libya isn't the idyllic petroleum haven that they'd all like it to be. Qaddafi is known to be unpredictable and despotic, and while he's receptive now, you never know how he might feel in a couple of years. There are other legal problems, like the fact that Libya requires all companies doing business in the country to sign an agreement that they'll boycott Israel. Unfortunately, these kinds of agreements are illegal in the US (though Libya may be willing to turn a blind eye).

So here's a little number crunching. The US alone uses 19.7 mbd of oil. If all of Libya's proven reserves went to the US, we'd only have another 5.4 years of oil. Unfortunately, we're not the only consumers of oil, so unless they really find a lot more than they already know about, it's not going to help all that much.

I think we can all agree that if Libya's total reserves are likely to be around 40Gb - and the published estimates are all fairly consistent - ASPO 32 Gb (with a depletion midpoint of 2011), USGS 41 Gb , EIA 39 Gb (plus the same "highly unexplored" areas quote from Wood Mackenzie) - then hastening the depletion of them by increasing production isn't going to make much difference at all.

As a side note, Libya did feature prominently in "Control of Oil", with the chapter "The Evisceration of the Libyan Independents" being one of the more intriguing sections. It hints that Colonel Gaddafi conspired with the majors to force the independent producers (Armand Hammer's Occidental Petroleum and the like) out of Libya in the early 1970's after his coup. At that time Libya was actually the world's largest oil producer, having outstripped Saudi Arabia in 1969 (pumping 3.1 million barrels per day to Saudi Arabia's 2.9). The book says that Exxon were predicting that Libya would be producing 4.6 million barrels per day by 1973 (from proven reserves of around 30 billion barrels). Instead, production dropped precipitously as the production quotas for the independents were first squeezed and then the industry was largely nationalised (then later crippled by UN sanctions).

So - while there weren't any claims of oil discoveries being suppressed in the manner that they were in Iraq, there certainly is some room for speculating that Libya may be able to increase production significantly and could have large as yet undiscovered fields. Even if these are larger than current estimates of 4 billion barrels of undscovered reserves, its hard to imagine it making a significant difference to the date of the peak (though it may help us bump along the top a little while longer).

Update: Corrected some glaring errors in the numbers..

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