BP and its Libyan partner, the Libya Investment Corporation (LIC) have signed a major exploration and production agreement with Libya's National Oil Company (NOC).
The initial exploration commitment is set at a minimum of $900 million, with significant additional appraisal and development expenditures upon exploration success.
"This is a welcome return to the country for BP after more than 30 years and represents a significant opportunity for both BP and Libya to deliver our long term growth aspirations," said Tony Hayward, BP group chief executive "It is BP's single biggest exploration commitment."
For comparison, the acreage awarded in the North Ghadames block alone is the size of Kuwait. The acreage in the offshore Sirt basin is the size of Belgium or nearly three North Sea quadrants. In total the acreage is more than ten times the size of BP-operated Block 31 in Angola where BP has announced 14 discoveries so far, or more than 2000 Gulf of Mexico deepwater blocks.
The agreement was signed Wednesday in Sirt, Libya, by BP's group chief executive Tony Hayward and NOC chairman, Shokri Ghanem.
BP and the LIC will explore around 54,000 square kilometres (km2) of the onshore Ghadames and offshore frontier Sirt basins, equivalent to more than ten of BP's operated deepwater blocks in Angola. Successful exploration could lead to the drilling of around 20 appraisal wells.
During this exploration and appraisal phase, BP will acquire 5,500km of 2D seismic and 30,000km2 of 3D seismic and will drill 17 exploration wells.
"We are delighted to be working with the National Oil Company of Libya to develop their natural resources for domestic and international markets. Our agreement is the start of an enduring, long-term and mutually beneficial partnership with Libya," said Tony Hayward, BP group chief executive.
Sirt and Ghadames are two of Libya's five major basins. Sirt onshore has been the most productive to date, having produced over 20 billion barrels of oil equivalent.
Offshore deepwater Sirt is believed to be 'on trend' geologically with onshore Sirt and is thought to be a buried rift with multiple play opportunities like those found in the North Sea where BP has considerable experience.
Ghadames basin is thought to be part of, and similar geologically, to the prolific Illizi and Berkine basins. Previous drilling in the 1970s and 1980s was based on early vintage 2D seismic data. BP plans to acquire extensive 3D seismic data using proprietary and the latest technologies. The offshore, deepwater Sirt acreage in water depths beyond 2000m, up to 300 km offshore is presently unexplored. It is considered a frontier deepwater basin, and a potential extension of the onshore Sirt basin.
"With its potentially large resources of gas, favourable geographic location and improving investment climate, Libya has an enormous opportunity to be a source of cleaner energy for the world," said Hayward.
BP will spend $50 million on education and training projects for Libyan professionals during the exploration and appraisal period, and, upon success, a further $50 million from commencement of production. The education and training programmes will be designed and managed in partnership with the NOC.
"The agreement reached today is a great success for Libya, the NOC and also for BP," said Hayward.
This agreement follows a Memorandum of Understanding signed between BP and the NOC in October 2005. BP submitted its formal proposal to the NOC in April 2006. Negotiations commenced in July 2006.
According to BP, this agreement represents a significant step forward in meeting the NOC's objectives as set out in its 'Exploration Master Plan' for 2005-2015.
BP's Master Plan seeks to increase reserves to 20 billion barrels of oil equivalent by increasing exploration in offshore and 'frontier' areas and through the application