Libya Oil and Gas Report Q1 2013

BMI View: Oil and gas production is expected to have bounced back strongly in 2012, despite theobvious political risks associated with Libya's transition to a new democratic government. Over thelonger term, both oil and gas volumes are likely to increase beyond pre-war levels as new investmentflows into under-explored areas - especially the offshore Sirte Basin. However, we note an eruption ofregional tensions under a still fragile government could destabilise upstream growth.

The key trends and developments in Libya's oil & gas sector are:

We estimate total liquids production of 1.62mn barrels per day (b/d) in 2012, rising to 1.77mnb/d in 2016 and 1.85mn b/d by 2021. Gas output is forecast to increase from an estimate of12.0bcm in 2012 to 18.0bcm by 2016 and 20.3bcm by 2021.

These forecasts are subject to upside risks depending on the level of upstream investment. Thenew democratic government has pledged to invest US$10bn raising oil and gas productioncapacity from existing fields and US$20bn on new exploration over the next 10 years, accordingto oil and gas minister, Abdurahman Benyezza. If that materialises, output could well increasebeyond our long-term projections.

International investment is also a big unknown. Foreign suitors are likely to be attracted byLibya's vast oil and gas reserves, which stood at an estimated at 46.4bn barrels (bbl) and 1.56trncubic metres (tcm) respectively in 2011. However, clear political risks, the introduction of newproduction sharing contracts (PSC), and a revised hydrocarbons law are all likely to affect thecountry's business environment.

Before the civil war, there was some 378,000b/d of refining capacity in Libya (according toBMI's Downstream Projects Database). Throughput has been well below this level in H112because the country's 220,000b/d Ras Lanuf facility remained shut-in until late August 2012.Our forecasts point to a gradual restoration of refinery utilisation, with 2013 set for a return topre-war levels.

Oil and gas consumption is set to return to pre-war levels gradually because damage toinfrastructure is likely to lead to lower domestic demand from power generation. However, overthe longer term, reconstruction efforts are likely to drive economic growth and oil demandhigher.

At the time of writing we assume an OPEC basket oil price for 2013 of US99.10/barrel (bbl), falling toUS$96.20/bbl in 2014. Global GDP in 2013 is forecast at 3.0%, up from an assumed 2.6% in 2012reflecting some recovery in the US, though uncertainty with regard to the eurozone debt situation and anapparent Chinese slowdown will continue to hamper growth. For 2014, growth is estimated at 3.2%.