Shell and Libya have set up a new joint operating agreement for their three-year-old liquefied natural gas deal to rejuvenate and upgrade the Marsa El Brega facility in Libya and explore for gas reserves that might sustain a greenfield plant.

Tenders for the rejuvenation phase are to be decided by the middle of this year. Drilling of the first exploration well will start in the first quarter of the year, according to the National Oil Corporation (NOC).

Under a joint operating agreement signed last week between Shell, Sirte Oil Company (SOC) and NOC, SOC will operate the LNG plant at Marsa El Brega during the upgrade.

Shell will cover the explor-ation, rejuvenation and upgrade costs. The cost of upgrading is estimated at $350 million, while rejuvenation will cost $293 million under the agreement.

If enough gas is found through exploration, a greenfield lique-faction facility would be built at Ras Lanuf at an estimated cost of $2 billion to $3 billion, NOC said.

Shell signed the original LNG development agreement in May 2005.

Linda Cook, Shell executive director for gas and power, said at last week’s signing ceremony that seismic activity at the company’s Sirte basin acreage is nearly complete. The first well is to be spudded in the first quarter of the year using a rig capable of reaching depths of 20,000 feet.

Marsa El Brega originally had a nameplate capacity of 3.2 million tonnes per annum. The rejuvenation and upgrade of the facility would see output return to previous levels. Current output is only enough to meet a contract to supply 700,000 tpa to Spain.

A Shell official said last year that the partners have carried out feasibility studies that indicated trains in the range of 4 million to 5 million tpa would be the optimum for a greenfield facility.

Work to examine site and soil characteristics at Ras Lanuf was to have started last year.

(Upstream & Zawya)