Q: You’ve managed to boost output to around 1.3mn b/d recently: quite a success given the ongoing conflict in Libya. Are you still targeting 1.4mn b/d for the end of the year?
A: We hope so. The conflict is unfortunately affecting our production. Many IOCs drew out their workforce from the country recently but we are doing our best. Over the last month our production was much less. A fire took out a generator at the Sarir field [MEES, 14 June]. We also finished maintenance work on the [Waha-operated] Gialo [field’s] pipeline two days ago which has allowed us to restore output.
We have a lot of potential. We can say we have more than 300-400,000 b/d spare capacity. But to achieve this we need to invest and work on the abandoned wells, which we are doing. So hopefully we can reach this figure if the situation doesn’t worsen. Unfortunately, the longer the conflict goes on the greater the risk to production.
ON LIBYA’S DIVISIONS
Q: Talking about the conflict, I’d like to ask what your opinion is on Agoco and Sirte Oil Company, two of your subsidiaries, expressing support for the Libyan National Army (LNA) advance on Tripoli – especially given NOC’s professed neutrality.
A: The position of NOC is very clear. Since the division of the country in 2014 our focus has been solely on sustaining production. This is our vision, our strategy. We are not assigning any blame to any party in this conflict. The NOC is neutral and non-partisan. Our goal and mission is to keep oil and gas flowing in the pipelines.
But we have seen, especially since the [recent] war began, that there have been calls for a shutdown in production from the eastern administration – we’re talking about a big figure. We are taking this very very seriously.
They are also attempting to export oil outside the NOC framework and have already signed some contracts.
We communicate with the public prosecutor and also the UN Security Council panel of experts. We handed them all the information we had. They [the eastern administration] are also engaged in UN lobbying. But so far the UN has showed us great support.
Q: Have they to your knowledge succeeded?
A: We have great support from the UN and the international community but they still need to do more to protect the NOC. The eastern administration is trying to sell oil to fund its war effort - these attempts could eventually lead to the partition of Libya. Two or three weeks ago the American embassy in Tripoli said they support NOC’s monopoly on exports according to UN Security Council Resolutions 2259, 2278, 2362. I met with EU ambassadors including the EU ambassador in Tunis maybe three weeks ago. They issued a statement in support of NOC keeping the monopoly on exports.
The parallel institution is not giving up on its efforts to sell oil, so we have no choice but to defend our monopoly. If they succeed in exporting oil, Libya will be divided for sure. Unfortunately, they are supported by some regional powers who are very determined to help them divide the country.
ON SQUEEZING OUT MORE OUTPUT
Q: To return to production. As you just mentioned, you’ve still got a large number of fields that are offline due to conflict. Which ones do you plan to bring online in the near-term? The Mabruk field is still offline after being damaged by Islamic State in 2015 for example.
A: Not only Mabruk which has been out of operation since February 2015, but Dahra, Bahi [both Waha], Ghani [Harouge], Zenad, and also [Zueitina’s nearby block] NC-74 is also offline. NC-74 includes many oil fields, including the Zella field. There are many mercenaries over there causing trouble. They have looted facilities, they have burnt cables and stolen copper [see map, p3].
We met with the eastern authorities in the last few months in order to send a team over there to carry out an assessment of required maintenance. Especially on certain fields over there we can build early production facilities. The fields are still young which means they can still produce oil by gravity, rather than by pumping.
But unfortunately the attack on Zella last month [MEES, 24 May] jeopardized our operations. The safety and security of our staff is our top priority so we decided to withdraw our staff. And from Ghani especially. Ghani is very close to that area and we had been preparing to carry out required maintenance there to restart soon.
Q: At what output?
A: We could produce 10,000 b/d easily from there, with minimal work. We are trying to squeeze these small drops of oil from various fields to boost overall output. We have really struggled in order to reach 1.2mn b/d. It is not an easy job in this hostile environment – a lot of work has been postponed or suspended because of the war. That’s why NOC is calling for a ceasefire. The war will affect the production at the end of the day.
Q: What is the status with the offshore Bahr Essalam Phase-2 project and work to boost output from the onshore Wafa field?
A: The only good news we have at the moment is from the offshore. We haven’t done much work onshore since 2013-2014. But the offshore picture is much better. We launched Bahr Essalam Phase-2 last year and brought most of the wells under the project online. Production is currently at 1.1bn cfd.
Q: Are all the wells planned under the expansion finished?
A: We still have one well to put online.
We now have this megaproject to develop the A&E structures offshore, which is a joint venture between NOC and Eni. It will cost about $5.6bn.
Both structures will produce around 760mn cfd and 35,000 b/d of liquids from 31 wells. Hopefully by the second half of 2022 we will produce from ‘A’ which will connect to Bahr Essalam’s Sabratha platform and then onto the existing facility at Mellitah.
‘E’ will take longer, but we hope to produce from there by 2024. The project consists of three segments. The first involves preparations for evaluating Feed. We hope to start this by September and complete it in one year. For segment two we are carrying out detailed engineering work on the planned drilling of the wells. The third segment is the geotechnical side, which includes the subsea surveying. The offshore situation is more promising since it doesn’t require staff to be onshore. As you know, Eni and Repsol drew their staff out after the attack on Tripoli [in April].
We are also doing good work on the onshore Wafa field. This project has two parts. The first is regarding compression. Wafa has been producing for a long time so the pressure there is dropping. The compression work aims to extend plateau production. We are also working on drilling three [infill] wells. One is already finished, the other is in operation…
[*Mr Sanalla gets a text message*] You know this is a tough environment. You have to follow everything on your phone. Unfortunately, we are working 24 hours… How do you say?
A: It’s 25/7 for us.
So to return to Wafa. The second well is progressing but the ongoing war is preventing us from supplying fuel for the third well. Wafa is near Ghadames - in the middle of nowhere. We are facing a lot of risks and we have to mitigate these challenges.
ON LIBYA’S FOREIGN PARTNERS
Q: I suppose this also ties into your recent plans to develop the North Hamada concession, which is also likely to be affected by the war. Also your partner there, Indonesia’s Medco, has recently quit Tunisia and rumors surfaced suggesting they are also looking to exit Libya too. Could you comment on that?
A: Not yet, no comment. There is no final decision. We haven’t finished working with them.
Q: In terms of foreign firms, there is the long-running issue regarding Total’s purchase from Marathon of their stake in Waha. Can you comment on the status of the negotiations there?
A: Unfortunately, because of the geopolitical situation work is not progressing. They understand that the situation is not permitting progress there.
Q: So as far as you are concerned Total doesn’t have a stake in Waha at the moment?
A: No, not yet. It is not finished yet.
Q: And also there was the BP/Eni deal in 2018. We haven’t seen much progress on that.
A: Yes, we were working on this one but unfortunately the Italians drew out their staff from Libya. But we will have a meeting with BP in London hopefully at some point next month so we will see what to do on this. This deal has also unfortunately been affected by the war.
Regardless, the outlook for production is fantastic and this keeps IOCs looking at Libya as a target - we have good potential.
Q: To clarify, has this deal been officially signed?
A: No, not yet. We just signed an MoU. It needs a lot of work in the future, we still have to fix many, many issues before we sign. This is oil, you know, it takes time. We don’t like to put our partners at risk due to the geopolitical situation in the country. We would like to encourage them to stay. We have to keep things on a good legal footing. We don’t want a company to come in the future and say “hey what have you done?”
Q: Mutual trust, I suppose.
A: Exactly, Exactly. That’s why it takes some time. And our partners, I think they understand the situation. They are trying to help us. We have good relationship with other British firms too.
Q: Are you working with any other British firms?
A: Yea, especially on the engineering side. We rely a lot on British companies like Wood and Petrofac.
We look to London as a hub for our work in the future. Especially in the field of capacity building, we have a good relationship with the British. In November we will have a meeting with some British companies in Tunis. We had one in October last year and one in Aberdeen in May last year.
We rely on the British so we are looking to tighten our relationship with them. They have the technologies, when it comes to capacity building they are the top.
Q: You also recently opened an office in Houston.
A: Houston will help NOC with procurement and engineering. We will be doing some work in the very near future with firms from Houston.
ON CONTRACT MODELS
Q: When launching the NOC Houston office you made a point to say that you were looking to get more oil services firms involved. Does that suggest that you are looking to rely more on services firms rather than typical partnership agreements with IOCs?
A: What I can tell you is maybe 2-3 months ago we formed a special committee to determine all our prospects. We have a lot of prospects and a lot of potential, but due to the situation in the country these have so far not been exploited. Now we are prioritizing which ones we can move forward with. And also there could be scope for selecting a good model of services. Not only like an EPSA [Exploration and Production Sharing Agreement] or DEPSA [Development and Production Sharing Agreements].
Maybe we will have a Production Services Agreement and some other model, but we will discuss this further. I met with the department responsible for this task a few days ago to check on their progress and gave them some direction on their work to expedite the process.
When this is complete we will have a workshop and select a good model. We want to create a low-risk model for our partners. So we will do something that will work well for them.
ON DOWNSTREAM PLANS
Q: How are things progressing in the downstream sector?
A: We will put our cracker online in Ras Lanuf soon, this will create more jobs and stimulate the local economy. So we will be manufacturing more locally rather than importing.
Q: Will the cracker be running at full capacity when it comes online?
A: We will see. This has been offline since the revolution in March 2011. Eight years. So our staff, they did good work for maintenance and we hope that we won’t see any problems. Also our polyethylene plant was offline for a long time. This will stimulate the local economy and will make the harbor operational again.
Q: Can you comment on the recent deal to restart gas supplies to the LifeCo fertilizer plants at Marsa El Brega? [MEES, 21 June]
A: We met with our partners in Paris two weeks ago and we agreed to gradually restart the two ammonia and two urea fertilizer plants.
We are also waiting to increase the production of gas as you know we succeeded in boosting production from the Al-Tahhadi field.
A: From Istiklal, yes. Al-Tahhadi is the old name. You know Tahhadi means challenge in Arabic. Istiklal means independence.
We are also hoping to increase gas output from [the Waha consortium’s] al-Faregh [Phase-2, see MEES 7 June]. We are looking to increase production to around 180mn cfd. This will be used for fertilizers and methanol.
This will hopefully be ready by September; this was also hindered by the war and was postponed. We planned to bring it online in May but due to the war work is progressing slowly.
Q: Can you tell me about your current refining capacity?
A: Low, very low. We have ambitious plans to increase the refining capacity. We were thinking to increase our capacity from 380,000 b/d to around 600,000. But due to the situation in the country…
Q: But your current available capacity is a lot less than 380,000 b/d.
A: Yes, we still depend on imports for most of our fuel. More than 70% of both diesel and gasoline is imported.
The other question is to do with subsidies. Smuggling [to neighboring Tunisia] is also still going on because of Libya’s low oil prices. Really, it is a mix of problems.
Q: On your relationship with the state-power company Gecol. You supply the fuel to the power stations which has been very challenging. Can you comment on the current situation? A power plant at Ubari in southern Libya was supposed to be starting up recently [MEES, 7 June].
A: We already supply Ubari with crude oil. The Presidential Council issued a resolution which gave NOC permission to start feeding the power station. Gecol is preparing for the commissioning of the power station.
Gecol is heavily dependent on NOC for both liquid fuel and gas - they are the consumer of our gas.
Q: Were there plans to capture gas from El Sharara and pipe it to the Ubari power station?
A: This is one of the strategic goals of NOC and I floated this idea last week with the minister of planning. I said we could do this you know. We have Atshan which is around 170km away. We have fantastic reserves of gas over there. This is one of the oldest discoveries in the country. There are also good reserves of oil there, but it is a difficult structure. I told the minister of planning we could do this as a fast-track project and requested a budget for it. It would be much better than burning crude at Ubari.
Q: One of the issues we’ve seen is that when export terminals have been shut down you have had to reduce production because of storage constraints. What is Libya’s storage capacity at the moment?
A: Unfortunately, I can say we lost around 70% of our storage capacity at Es Sidra and Ras Lanuf terminals. But we have also had big problems with our pipelines. Long shutdowns resulted in corrosion issues. We have been working to repair the Gialo to Waha pipeline but work still remains. We have leaks from this pipeline on a daily basis. We just now managed to put online a storage tank that caught fire in 2008. It took 11 years; 11 years!
ON OPEC POLITICS
Q: Turning to Opec. Are there growing discussions within Opec about ending Libya’s exemption from the cuts? Are you coming under any pressure now that you’ve had success in boosting production?
A: So far our colleagues understand the situation in Libya. Libya needs every single barrel, every single drop of oil. The country is passing through a very difficult time. We don’t expect them to ask us to make any kind of production cut.
Q: Would you say that there is potentially a future level when those questions would come up?
A: Libya’s output at the last meeting was 1.17mn b/d. At the moment we really struggle to even produce close to 1.3mn b/d. Sometimes it’s only 1.1mn and 1.2mn b/d. Last month’s [June] average production was less than 1.1mn b/d. I think our colleagues understand us very well.
ON DATA TRANSPARENCY
Q: You’ve always said that transparency is a priority for the NOC. With this in mind do you see Libya once again submitting Data to Jodi?
A: [Question answered by Libya’s Opec Governor Imad Salem] During 2014, the government that is currently based in the east was recognized by the international community.
So they were able to appoint Libya’s Opec governor and the national representative for the period 2015-19. Unfortunately, they appointed the wrong people, who never submitted any data. The chairman decided last month, with Prime Minister Serraj, that NOC should appoint the national representative and governor. And I’m sure we will submit all data as we did before 2014. So if you’re talking about the period from 2014 to now, this was not our responsibility.
Q: When can we expect that?
A: [Salem] We will start from tomorrow! And you will see regular information go to Jodi, to Opec for their monthly reports, everything.
Q: Just to wrap up, what are your key priorities for the next 12 months?
A: [Sanalla] As I’ve said we will focus more on redundant wells. So we can produce more oil from these wells, with some work especially with Schlumberger and our services company Jowfe. We have already succeeded through Agoco and Mellitah to produce a good quantity of oil. We are conscious of the lack of storage capacity, so we need investment there. After the war the budget was reduced. We are still in discussion with the government over this.
Q: What would you consider a good budget?
A: More than what we receive! Unfortunately, our budget has been reduced by more than 60%. This will affect our operations especially on workovers. You know we have a lot of problems in wells, we have to replace pumps etc. I can assure you that we have good spare capacity, but we just need a little investment. We could do it then just like this [snaps fingers]. It also depends on the security situation of course. We are working very hard on [North] Hamada, on Zella, and also C-100 which is close to the Tunisian border. Hopefully by next year we will see some oil from there. Initially 10,000 b/d and then gradually another 10,000 b/d. This is a new oilfield operated by our subsidiary Agoco.
Thank you very much for your time.
Interview conducted by MEES North Africa editor Aydın Çalık in Vienna on 30 June.