The Libyan Gold Rush and the Reasons Behind It
By Margareta Pagano, First Post 9/9/09
Sep 11, 2009 - 9:40:29 AM

Florence Heath can't wait to get back to Tripoli. She's a 27-year-old geologist who works for Shell and, along with another 200 or so Shell employees, is taking part in what oil experts are calling the Libyan Gold Rush - the exploration for oil currently underway now that the rogue state has opened its doors to foreign oil companies.

Shell was one of the first international companies to get licenses to explore for hydrocarbons in Libya in 2003, well before the current flurry of interest and the controversy over whether the Scottish government, backed by the British, released the Lockerbie bomber, Abdelbaset al-Megrahi, in a crude trade-off for oil rights and other commercial interests.

Libya may have only recently come into British focus because of the Megrahi scandal, but most of the world's biggest oil companies have been drilling away for the last few years to get a piece of the action. For Libya is said to have one of the biggest proven reserves in the world, certainly in Africa.

As Heath told The First Post: "Everybody is really upbeat, there is a huge sense of energy in the industry, the expat oil people as well as the locals [of Shell's 200 personnel, 40 are from Britain, the rest are employed locally]. It's one of the rare 'last frontier' locations for exploration in the world."

National security and energy scarcity are what makes Libyan oil and gas special

Heath is one of 11 geologists working for Shell's exploration team drilling for hydrocarbons ­ mainly gas ­ around Sirte, deep in the Libyan desert. Shell has the rights for about five blocks of land and plans about 18 wells although only one has so far been drilled, which at 15,000 to 20,000 feet is one of the deepest in the world. So far it is too early to say whether the prognosis is good.

Heath is not the only one to be excited by the prospect of big discoveries in Libya. Just about every major oil company in the world has exploration rights - the much-discussed BP deal being one of the most recent.

So what makes Libyan oil and gas so special - so valuable that the government might want to intervene in something as sensitive as the Lockerbie bomber's punishment in order to preserve Britain's chance of a part in the Libyan gold rush? And why is it only now, with the Megrahi affair in the headlines, that Libyan oil is such an issue?

As usual, the driver is geo-political - national security coupled with energy scarcity and price. At present, most of the West's oil comes from the Middle East while much of the gas comes from Russia ­ both fragile and sensitive territories.

That's why bringing Libya in from the cold was, and is, so crucial. After 20 years of being cut off from the US and the UK because of the sanctions imposed back in the 1980s by Ronald Reagan, Libya has more or less been excluded from Western markets so its oil and gas production has been hampered. Production peaked in the 1970s with 3.3 million barrels a day, falling to 1.85 million by 2007.

The West is desperate to avoid becoming dependent on Russian fuel supplies

David Strahan, author of The Last Oil Shock, says Libya is aiming to push production back up to 3 million barrels a day over the next few years: "There's no doubt that after the Iraq invasion, Libya was scared that they could be next because of its huge under-exploited reserves. Everyone involved - the US, the UK and Libya - understood that a rapprochement between them was vital."

But it's not just a case of Libya having been frightened of western intervention. The West has been equally anxious about its dependency on Russian supplies, which is why it is looking for alternatives. Libyan oil is not only high-quality light crude while its gas can be turned relatively easily into LNG (liquified natural gas), but the hydrocarbons can be brought relatively cheaply and safely into British homes via the pipeline into Italy or direct by sea.

Oil exploration technology has changed dramatically over that period, too. What was impossible to drill then, is now possible because of new techniques and the Libyans know they need foreign skills and capital to extract what still lies beneath the sand.

The contraption Heath is photographed next to at the top of the page is symbolic of that change: it's called a vibroseis truck, used in place of old-fashioned dynamite.

As Heath says: "For us as geologists, Libya is not only really exciting because of the potential but because of how we can use new techniques and new geologies to find more oil, gas and other hydrocarbons. There is no need to panic ­ peak oil is not here yet."

Source: Ocnus.net 2009