Economics of Natural Gas Exports from Libya to Europe

In addition to being the holder of Africa’s largest proved crude oil reserves, Libya is a significant holder of natural gas reserves as well having the fifth largest proved reserves. Libyan proved reserves of natural gas are about 55 trillion cubic feet (tcf), although the period between 2004 and 2015 witnessed a dramatic increase in production of natural gas, the reserves remain stable during last decade. With reserves to production ratio above 100, Libya has the ability to produce gas not less than 100 years with output level of 10 bcm with potential to double this production Mac Donald M.( 2010) and Hanfer and Tagliapietra (2013). Libya has a significant potential to be a strategic supplier as compared to other natural gas suppliers to Europe in the Mediterranean region. In order to obtain a sustainable low-carbon economy, European Union countries are moving away from gasoline and diesel with high CO2 emissions towards efficient energy sources such as natural gas and renewable energy. The replacement of natural gas for coal and petroleum is reducing emissions of carbon (C2ES, 2013). In this study, we tested CO2 emissions convergence in EU countries and EKC in Italy. Also, we conducted a financial assessment of the natural gas pipeline project in Libya. Our findings refer to evidence of convergence in CO2 emissions, with absence of inverted U-shaped relationship in both EU countries and Italy. In addition, our financial analysis results show the capability for Libya to increase gas production and its potential to meet the demand in Europe by the developed natural gas pipeline. Keywords: Bahr Essalam, CBA, CO2 emissions, EKC, EU, natural gas pipeline, Libya , Italy.