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BP back in Libya: British oil major is taking risks returning to chaotic country

For BP, a company which has suffered following massive bills incurred from the Deepwater Horizon disaster in the Gulf of Mexico, entering such a market may not immediately appear to be an example of prudent business decision making. Provided BP can drill oil reliably, and the country remains sufficiently stable to enable foreign companies to operate freely, the partnership with Eni to begin exploratory drilling in the early part of 2019 could prove fruitful. Exploring for oil at this stage could prove to be a valuable strategic move when viewed from a long-term perspective. Demonstrating commitment to the government by accepting greater risks now could pay extra dividends were the oil industry to enter a period of sustained calm.

During September 2018 the chairman of the National Oil Corporation (NOC), Mustafa Sanalla announced oil production had reached the highest level since 2013, demonstrating the country is benefiting from improved stability. Oil majors are becoming increasingly interested in re-entering the troubled desert state. Spanish based Repsol and French oil company Total are increasing investments, suggesting BP was correct to re-enter Libya to avoid losing too much ground to rivals in what is an industry that the British company left in a hurry with the onset of the Arab Spring.

Since the 2011 Arab Spring Libya has been lurching from crisis to crisis. For oil companies present in the country the security situation remains very delicate and prone to rapid deterioration. To make the re-entry of BP into Libya work the company is dependent upon an improving security environment. Ensuring the operations of BP in the troubled country are not impacted by ongoing militant engagements and political strife will be essential to justify the move to risk capital and resources in entering such a risky industry.

Posted in Energy, Oil & Gas.

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