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Some Looking Forward to Recovery of Libyan Oil Production

Some Looking Forward to Recovery of Libyan Oil Production
Some Looking Forward to Recovery of Libyan Oil Production
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William Ide

Although fighting continues in parts of Libya, and a bit of uncertainty remains, some are already beginning to look at the prospects of recovery. Oil companies, and countries that rely on imports of natural resources from Libya, are planning for the full restoration of the country's oil industry.


As opposition forces celebrate their capture of Moammar Gadhafi's headquarters compound, the work of rebuilding Libya’s war-ravaged cities and infrastructure is one of a host of challenges the country will have to deal with in the days ahead.

Oil is the country's key industry and getting oil production and exports back on-line is crucial. Libya has the largest oil reserves in Africa and before the uprising began, the country produced about 1.8 million barrels of oil a day, or about two percent of the world’s production.

Luckily, unlike the damage suffered by cities and towns, the oil industry appears to be largely unscathed.

Samuel Ciszuk, a senior Middle East analyst at IHS Energy, says Libya could quickly return to pre-war production levels. "Companies with large production capacity in Libya, for instance ENI but also companies like Repsol and so on which have a lot of facilities in the southwest as far as we know has escaped damage almost completely," he said.

No one will know for sure how long it will take until the country's export and production facilities are inspected and back on line.

Over the past several days, global oil prices have largely followed developments in Libya. As Moammar Gadhafi's grip on power began slipping, following the rebels' quick offensive into Tripoli, prices dropped. But then began rising as pockets of fighting persisted and as other global economic volatility put pressure on the cost of crude.

Most of the Libya’s oil is exported to Europe, with Italy receiving the largest portion by far. China and other countries are major importers as well.

Ahmed Jehani, chairman of the stabilization team of Libya’s National Transition Council, says oil agreements made before the Gadhafi government's downfall will be honored. "All contracts will be honored. All lawful contracts will be offered, whether they are in the oil and gas complex or in the contracting. At the moment it is not for this government to decide whether they will be revoking any contract," he said.

The international community has expressed its readiness to come to Libya's aid and help it rebuild. And the United nations is holding a meeting on Libya’s future later this week.

Libya's infrastructure was weak before the war started, some regional analysts note, so the amount of reconstruction needed is limited. But building up a new Libya will take money.

Michele Dunne, who heads the Rafik Hariri Center for the Middle East at the Atlantic Council, says that is something Libya is well prepared for. “Libya will not face the problem that some other countries have had because they’ll have ready money to pay for it. If you’ve got ready money to pay for the reconstruction, then its much less of a problem," he said.

A quick return of oil production will help, Dunne says. As will the return to Libya of billions of dollars worth of Moammar Gadhafi’s frozen assets overseas. The assets were frozen by the U.N. in February and now the international community is working to get the urgently needed funds to the anti-Gadhafi opposition as soon as possible.

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