Modifying theLibyan fiscal regime to optimise its oil reserves and attract more foreign capital part 1:LEPSA Iproposal

Abstract

AbstractThe currentExploration andProductionSharingAgreementIV(EPSA IV) has deficiencies that militate against increased capital investment inLibya's petroleum industry. This paper proposes an improved technique for determining the equity split called the ‘share equation’. The proposed share equation would simplify the Libyan fiscal regime and will provide an incentive for foreign oil companies to invest more during the contract period by raising their percentage share of production when they increase their capital expenditure. More capital expenditure will lead to increasing the recoverable reserves and will subsequently improve the oil recovery for individual fields and for the entire country. The share equation will change the percentage share of production automatically with any change in the oil price. It will increase the percentage share of production of theLibyanNationalOilCorporation when the price goes up, and increase the percentage share of production of the foreign oil companies when the oil price goes down. Furthermore, the share equation takes into consideration the probability of success in each of theLibyan basins. The foreign oil companies will get an increased reward when deciding to take more risks by exploration in unknown basins such as theKufra basin andCyrenaica platform. But, the share equation will eliminate the restrictive parameters likeAandBfactors, base factor andRratio in the currentEPSA IVmodel. This proposal for modifying theLibyan fiscal oil regime aims to increaseLibyan oil reserves and attract more foreign capital. By giving more flexibility to the foreign oil companies, theLibyan oil sector will get more contributions of foreign capital and technology. This will improveLibyan oil production and increase the remaining oil reserves. We call this new agreement theLibyanExploration andProductionSharingAgreementI.