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A look at oil production in Libya

With an average oil production of 384,686 barrels per day in 2016, Libya may not seem like a big oil player, but this relatively low figure belies the country’s true oil potential.

Libya actually has the largest proven reserves in Africa and is among the world’s top 10 by proven oil reserves. Its limited production is more the result of past sanctions against the Gaddafi government and instability following the 2011 civil war.

Libyan oil exploration only really started in the latter half of the 20th Century. Prior to this, a professor from Milan University had found petroleum while heading a water drilling program in 1935, but a subsequent exploration in 1940 found its equipment inadequate for the harsh Saharan conditions. The program inevitably stopped altogether when World War II spread to Libya.

Once Libya became an independent kingdom in 1951, it could begin granting prospecting permits to international petroleum companies. The Suez Crisis of 1956-57 made Libya extremely attractive to oil companies, because during the closure of the Suez Canal, oil from sources further east needed to be shipped via the southern tip of Africa at considerable additional cost.

ExxonMobil, which makes the hydraulic oil Mobil DTE 24, was an early player in Libya’s oil industry under its Esso brand. It first drilled three wells in 1957 near an existing find across the Algerian border, and one was successful, albeit only producing 500 barrels a day. In 1959, Esso found a more productive well in the Siritica region that gave 17,500 barrels a day, followed by another at 15,000 barrels a day. As more major oil fields came online, pipelines and export terminals were constructed.

A notable feature of the early Libyan oil concessions was how operators had to return a quarter of the concession after five years and more at later stages. This helped new companies to gain a foothold in Libya and explore territories where the original holders had failed to find oil. One company, Occidental Petroleum, had particular success in producing oil from concessions handed back by other oil companies.

In 2010, prior to the civil war, oil production in Libya was 1.65 million barrels a day. It is now starting to see higher production levels as the internal situation stabilizes, with Libya’s National Oil Corporation aiming for output over a million barrels a day by the end of the year.

With low production costs, relatively underexplored regions, and convenient access to European markets, Libya may well become a major oil player again.

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