OPEC - Abu Libya.

The following is a review of the main developments and policy changes among OPEC's member-countries which may have an impact on the market during 2007:

Libya: Producing 1.7m b/d, Libya is to raise its crude oil output capacity to 2m b/d in 2007 and reach 3m b/d within five to seven years, the

head of Libya's state-owned National Oil Corp (NOC), Shokri Ghanem, said in comments published on NOC's website. However, it does not mean Libya will not stick to its OPEC commitments. Ghanem said: "Increasing the production capacity does not mean increasing the production because we are committed to certain rules in our dealings with OPEC". Libya has hold its third bidding round, which it awarded on Dec. 20. It is part of a national plan to boost exploration to discover another 20 bn barrels of oil, a senior NOC official told an investment roadshow in London. Libya's reserves are currently estimated at over 37 bn barrels.

Decades of sanctions have left Libya's oil sector vastly under-explored. The country has very competitive exploration, development and operational costs as well as being relatively safe and open to foreign investment with its use of production-sharing agreements (PSAs).

Ghanem says: "We also plan to encourage investment in oilfields discovered previously which were not considered commercially viable due to their location or due to the high costs of upgrading". High oil prices have now made these fields commercially viable.

In addition to developing Libya's oil sector, Ghanem wants to boost natural gas, oil refining and petrochemicals. Libya is seeking international investors to upgrade a number of refineries, including Ras Lanuf, az-Zawia, Tobruk and Brega, as well as a petrochemicals and a fertilisers complex. Libya is hoping to cash in on the growing interest in natural gas, especially considering its location on Europe's doorstep.

Ghanem says: "In addition to exporting gas to Italy and exporting liquefied [natural] gas (LNG), we have other considerable potential onshore and offshore. Hence now we are developing a national policy to invest in natural gas directly by collaboration with overseas companies".

Under OPEC's Oct. 20 agreement to cut production by 1.2m b/d from Nov. 1, Libya was supposed to lower its output by 40,000 b/d. But this does not seem to have happened as the actual production has been steady at 1.77m b/d since August.