First Fruits
With Iraq's instability showing no signs of abating, it could be a long time before international oil companies see an atmosphere conducive to pursuing new exploration and production opportunities there, beyond pre-existing deals such as Lukoil's. The less heralded return of Libya to the international fold looks like it will bear fruit much sooner.

The Financial Times recently estimated that the oil sector in Libya would need up to $30 billion over the next 10 years as the country seeks to expand production capacity from 1.6 million barrels per day (MBD) to 3.0 MBD. Shell has already announced a gas exploration agreement with the Libyan government.

The terms required to lure more companies back will need to be attractive, and these opportunities will have to compete with others elsewhere. But they start with two key advantages: proximity to the large markets in Mediterranean Europe and the prospect of crude oil qualities matching those of Libya's current production, which is lighter and sweeter (lower in sulfur) than most Middle Eastern oil.

On balance, although Iraq has much greater long-term potential, the re-opening of Libya could have a bigger impact on the market in the medium term.