TRIPOLI, Libya, Oct. 21 (UPI) -- Libya has a lot riding on BP's plans to drill the first deep-water well in the Gulf of Sidra, an offshore area the size of Belgium in the Western Mediterranean.
And it's not just because of the disaster at BP's Macondo well in the Gulf of Mexico, which ruptured April 20, killing 11 workers and causing the worst U.S. offshore oil spill that led to U.S. President Barack Obama to declare a moratorium on deep-water drilling there.
Major international oil companies fell over themselves to rush back into Libya, with the largest reserves on the African continent, when Col. Moammar Gadhafi abandoned his secret nuclear programs in December 2003 and ended his country's two-decade isolation. That led to the 2004 lifting of United Nations and U.S. sanctions that had seriously eroded its economy, particularly the oil industry.
Exxon Mobil, Chevron and Conoco Phillips of the United States, BP, Royal Dutch Shell and Eni of Italy, most of which had operated in Libya before being expelled in 1971, so far have precious little to show for their endeavors or their investments.
Oil production reached some 1.7 million barrels per day in 2008 before the Organization of Petroleum Exporting Countries, which Libya joined in 1962, restricted output in 2009. The Tripoli government wants to restore its 1970s peak of more than 3 million bpd by 2015 and 3.5 million by 2020.
The Dubai-based Middle East Economic Digest reports there is a widespread belief in the industry "that this goal is likely to remain a distant dream …
"State energy firm National Oil Corp. has privately told foreign investors that it sees a 2.5 million bpd target as more realistic for the 2015 deadline."
The lack of oil strikes by companies seeking a share of Libya's largely unexplored oil and gas reserves has exacerbated "what many industry executives see as an extremely difficult operating and business environment," MEED observed.
"Libya doesn't have a good track record in getting things done," said Samuel Ciszuk, Middle East energy analyst with U.S. consultancy IHS Global Insight.
A string of disputes with Europe has resulted in Tripoli blocking visas to Europeans, including oilmen. This reportedly has caused "major disruptions" in the oil exploration program.
"Such behavior could cause great problems for Tripoli in the future," MEED commented, "especially if Iraq rejoins OPEC's quota system, effectively demoting Libya's importance within the group."
For now, Tripoli is pinning its hopes of a turnaround on deep-water exploration licenses issued since 2005.
That's where BP comes in, with its $900 million drilling program in the Gulf of Sidra, where in the 1980s Gadhafi's air force and navy clashed with the Americans over his "line of death" that defined Libya's rights over the entire stretch of sea.
"This is fantastically important exploration for Libya," said John Hamilton, author of a study on Libya's energy future. "If it works out, it will open a whole new future for Libya as a hydrocarbons producer on Europe's doorstep."
BP plans to drill five deep-water wells under a May 2007 deal with Gadhafi covering the Gulf of Sidra and an onshore concession in Ghademe Basin.
The northern sector of the Ghademe zone is considered to be a geological extension of Algeria's lucrative Alrar gas field.
These wells will be under intense scrutiny following the Gulf of Mexico disaster that has stirred unease about such drilling operations.
At 5,576 feet below sea-level, BP's first well will be 650 feet deeper than the ill-fated Macondo well in the Gulf of Mexico. The Mediterranean's deepest well, at 7,870 feet, lies in Egyptian waters.
Shell has also drilled two wells in the Sidra basin and the Financial Times reports that it has two more under way. But it hasn't found oil yet.
Shell is also refurbishing a 39-year-old liquefied natural gas plant at Marsa al-Brega, and hopes to boost LNG output there from 700,000 tons a year to 3.2 million.
It's exploring for gas onshore in Sidra and may construct another LNG plant at Marsa al-Brega if it hits pay dirt.
LNG, which is carried by tanker rather than pipeline, would allow Tripoli to extend its gas exports to northern Europe, boosting Libya's strategic importance to Europe as it strives to break its dependence on Russian gas.