TOP INTERVIEWS Interview with DR. ABDULHAFID AL ZLITNEI CHAIRMAN, NATIONAL OIL CORPORATION (NOC) Zawia, 12th October 2002 NOC is not only the biggest oil company in Libya but as well it has assumed the role of regulator, a Ministry of Energy of sorts. Why? These roles were defined by the law and by further decisions of the Legislative power. There is a distribution of powers or responsibilities in NOC, dealing with matters regarding production and regulatory matters, and we try to keep them as balanced as possible. The General People's Committee, our Government, decides as a whole on matters, which used to be responsibility of the former Ministry of Energy. The NOC now takes this role and will propose decrees or by-laws and the General People's Committee, who is in charge of discussing and approving or not approving them. So we actually form part of the Government. As far as the regulator role is concerned, what are the possible changes to Libya's 1955 hydrocarbons legislation, in order to adapt it to the modern markets? Since the establishment of this law, in the early fifties, there has been a number of amendments, and these amendments were also followed by a number of by-laws and government decisions that have to be issued in order to meet, to achieve the requirements of the oil sector. The proposal of a new law is taking into consideration all these amendments, all the changes that took place and also is introducing provisions and incentives for potential foreign investors. Secondly, it is introducing clauses regarding the gas sector, because it is becoming a very important part of the energy sector in Libya. The draft law is now in the process of revision, passing several legal and technical tests, and then it will be presented to the Legislative, the Congress. I cannot say a fixed date of issuing, but it will be a question of months, depending on the final stage of approval. According to a recent survey, Libya appears as the number one preferred location for oil exploration and production. In your opinion, which are the main attractions of the Libyan oil sector? When they say it is very attractive it is because there are huge areas and basins that are unexplored yet. It is well known that only something less than 30% of Libyan basins are being exploited. But there remains 70% of unexplored territory with great potential. Which are the reasons for this under exploitation? There are historical reasons. The first discoveries that took place happened to be gigantic, and they provided a very substantial production (2.5-3 million bpd). That continued until the 80's. Then the exploration activities where not that attractive as before because Libya depended on their own resources to do this. Most of the ones that took place after that were to replace the existing producing wells. During the 90's there were difficult international economic problems, regarding technical know how, restrictions for foreign capital due to the United Nations regulations and the conditions that followed those sanctions. That continued throughout the Nineties. Now, with the suspension of sanctions things are starting to improve again. Following a sector analysis, in order to achieve its goals, Libya will require as much as $10 billions in foreign investment through 2010. What are the streamlines of this investment policy? As I told you, after the sanctions period we have launched an important discovery and investment program in the sector, in order to untap the resources in the basins that have not been explored yet. We have already started developing programs and extending concessions with partners that are working with us for a number of years, and they have plans now to further develop their activities. Our biggest partner, the Italian operator Agip, is launching a very big project in utilising gas and this project alone requires 5 billion USD. There are other gas projects in other parts of the country that also requires large investments. Anyhow, we will continue our policy of having joint ventures with foreign partners, either with the existing ones or new ones that will come depending on the commercial activities and the needs of the industry. So the doors will be open to all participants, but the ones that are already here have the advantage of their concession areas, which are quite large, in which they can carry on doing more exploration and improving its production. You have mentioned this project concerning Liquefied Natural Gas (LNG). At which stage is this project and what is the general strategy on what gas production, transformation and export is concerned? All the eight major contracts concerning the project as a whole are already signed and approved. The Western gas project, which has approximately a capacity of 10 billion cubic meters per year and an excess capacity of 25%, is expected to begin production and export by the end of 2004, maximum the beginning of 2005. That is the time limit for delivering the gas. It is a huge project and involves very large and reliable contracting companies as well as requiring much material and manpower at the same time. It is opening up a new horizon in utilising these resources. There are also other fields which are now being developed offshore, like the considerably big field both of gas and oil discovered by Wintershall. There is also an important gas project in the Syrte area. This gas is going to be used in producing electricity and for exporting LNG to the countries with facilities to receive it. That is why we need new regulation in this sector, to attract partnerships towards it. As you know, our readers are investors always looking for new opportunities. We have talked about upstream in oil and gas. What about the downstream operations? In which fields is NOC looking for new partners? We have been revising our strategy regarding downstream programs, and there is going to be a giant project in Ras al Lanouf area, which will be in refining and petrochemicals area. We have already invested 7 billion USD in this complex, which needs now upgrading, extension and partnerships in the downstream products (technical, know how, marketing, transport). The refineries also need upgrading to meet international environmental standards for refined products. We are lining up now a number of potential foreign investors that we are targeting for partnership in operation and marketing. This is a very challenging project. NOC is also active abroad with its investments through Oilinvest. What role does this company play in the overall strategy of NOC? Oilinvest is involved in marketing. They have refineries in Europe, in Italy. They also give security to the consuming countries that the flow of oil products will be maintained, something that industrial countries are very much worried about. When they see that refineries, the gas stations, the capabilities and the oil supply are kept by Oilinvest the feel much more stable. Also it helps to balance the marketing strategy in the international markets, not only Europe but worldwide. They have plans also to line up with some upstream activities and partnerships with other companies in other countries. As the representative of Libya among the OPEC countries, could you explain to us, what is the strategy of Libya within this organization? We are in favour of stabilising the price of crude oil. It is not in the benefit of anybody, neither the producing nor the consumer countries to have a volatile market with changing prices because this is not going to help the consumers nor the producers that depend on oil revenues to develop their economies. We want a stable market that will benefit investors, consumers and producers. It is also important to see that the developing countries that need oil for their industries should be helped through different policies of the member countries to secure the oil flow. A stable market is good for all, so that is why the OPEC and other international energy associations have agreed to gather producers, consumers and investors in a two-yearly reunion to address the matters that worry them and to work in the stabilisation of the market. Dr. Zlitnei, you have been chairman of NOC for about a year. Looking to the future, what is the legacy you would like to leave to your country and to the future generations? I would like to see that a transition to a new phase takes place. We are about to transform this sector in a much more modern sector both at a technological and environmental level, with stable partnerships and securing steady and growing oil revenues for the national economy. Thank you very much, Dr. Zlitnei Thank you Note: WINNE cannot be held responsible for the content of unedited transcriptions.