Signing of a Joint Operating Agreement concerning the Liquefied Gas Plant at Marsa El-Brega

Source: 1/15/2008, Location: Africa

NOC, Sirte Oil Company (SOC) and Shell Exploration and Production Libya Signed agreement. This agreement is an ancillary agreement to complement the Liquefied Natural Gas Development Agreement signed May 5th, 2005. Dr Shokri Ghanem signed on behalf of NOC, Engineer Ali Alsagair signed on behalf of SOC, and Ms. Linda Cook on behalf of Shell Exploration and Production Libya.

The agreement stipulates that SOC operates the LNG plant at Marsa Al-Brega during Rejuvenation and Upgrade. The rejuvenation aims to increase the lifespan of the Marsa Al-Brega plant by 25 years with the same current capacity of 35,000 LNG barrels per day. In case of new discoveries by either Shell or by third parties, an upgrade of the plant will take place to increase production to 120,000 barrels per day.

According to the agreement, Shell covers the exploration, rejuvenation and upgrade costs of the LNG plant. The total costs of the Rejuvenation and Upgrade are 643 million Dollars (293 for rejuvenation and 350 for upgrade).

Dr. Bashir, Chairman of the Management Committee of the LNGDA, said that the agreement includes two parts, the first pertaining to exploration programmes. The second pertains to gas programmes and is divided into three stages:

1st stage: the rejuvenation programme; in which Shell will invest $293 million to cover the expenses of rejuvenating the existing Marsa Al-Brega LNG plant, which will be handed over completely to the NOC if no additional gas is provided.

2nd part: where additional gas is either found in Shell's concessions or provided by third parties that will lead to upgrade thereby requiring additional total costs to $500~600 million.

3rd part: the construction of a new LNG plant in the case additional gas is provided through Shell's concessions. The cost of a new LNG plant could reach $2-3 billion.

The agreement stipulates that SOC be the operator of the Marsa al-Brega LNG plant.

All engineering studies have been conducted in order to tender for the rejuvenation project; the results of the tender are expected to be known by mid-year 2008.

Linda Cook, the Executive Director Gas and Power Royal Dutch Shell, indicated that Shell is pleased to invest in Libya. She further indicated that the Liquefied Natural Gas Agreement (LNGDA) includes exploration activities, rejuvenation and upgrade of the Marsa al-Brega LNG plant with a possibility of constructing a new LNG plant in Ras Lanuf. She added that seismic activities are almost complete and that the first well will be drilled within the first quarter of this year using a high-spec. drilling rig that can reach depths of 20,000 feet.

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