Monday, Aug 22, 2011
(Adds Marathon comment and Hess declining to comment.)
By Benoit Faucon
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--While some in the oil industry are taking their first steps to resume Libyan operations as the civil war appears close to an end, experts say restoring production to pre-war levels will take time.
The months-long disruption of Libyan oil exports has forced western motorists to stump up more cash at fuel pumps, but they'll have to wait awhile longer before any new Libyan oil barrels reach their shores.
Bombings have created extensive damage and pipelines may be clogged with a waxy crude oil after remaining stagnant for months, international and rebel oil companies' staff said. That will hinder any swift resumption of oil production to pre-war levels, they said.
"Full production [of more than 1.6 million barrels a day] will take some time as parts of the Libyan oil infrastructure [were] damaged from the civil war," said Dominick A. Chirichella, of consultancy Energy Market Analysis, in a note Monday.
The rebels and international oil companies, however, are already moving to secure facilities, assess the damage and restart the gradual flow of crude oil--the lifeblood of Libya's economy.
Rebels overran most of Tripoli over the weekend, bearing down on the last pockets of resistance near the compound of Libyan leader Moammar Gadhafi after six months of conflict. With victory now in sight, the rebel-controlled Arabian Gulf Oil Co., or Agoco, has received the assistance of troops to protect its pipelines and oil fields in eastern Libya, a spokesman said Monday. Before the war, when the company was run by Gadhafi's government, it normally produced 425,000 barrels of oil a day.
Though Agoco refused to say Monday when production could restart, it previously said it could produce 180,000 barrels a day within two weeks, once security is ensured.
Meanwhile, Italy's Eni SpA (E) has sent a technical team to Libya to assist in the resumption of operations, a spokesman for the Italian foreign ministry said. Eni, one of Libya's largest operators before the war, declined to comment.
Yet most foreign oil companies that shut down operations when they pulled out staff in February said it's too early to say when their Libyan oil operations will restart. Spokespeople for OMV AG (OMV.VI), Wintershall AG, BP PLC (BP), Royal Dutch Shell PLC (RDSB.LN), Total SA (TOT), Repsol YPF SA (REP) and ConocoPhillips (COP) declined to give a time frame Monday for their return or resumption of production.
One international oil company hopes that its return would give it the opportunity to improve its existing contractual terms, a person familiar with the matter said.
With the exception of ConocoPhillips and Repsol, staff at the oil companies said they have been in contact with the rebels to pave the way for the companies' return.
One Libyan oil official said Repsol, Total and OMV may restart the Sharara field, which has a production capacity of more than 200,000 barrels a day, within months of securing the facilities because its infrastructure wasn't damaged.
By combining Sharara with the partial Agoco production and marginal oil output from other sources, Libyan oil output could then reach 500,000 barrels a day within a few months, the person said. Much of that oil would cover domestic needs, with little left for exports.
Though the circumstances are different, the expected slow recovery echoes that of Iraq, which took more than four years to exceed its production level from before the U.S.-led invasion in 2003, according to the International Energy Agency.
The Libyan oil officials said a return to normal could take less time--from one to two years--but they admitted that increasing production will be fraught with challenges.
For instance, resumption of full production at Waha Oil Co., which operates concessions partly owned by Marathon Oil Corp. (MRO), ConocoPhillips and Hess Corp. (HES), will be hindered by extensive damage at its Es-Sider export terminal, they said.
ConocoPhillips said it does "not know what the extent of damage" is on the operations, which previously provided average output of about 350,000 barrels of oil equivalent a day.
Marathon said it had "preliminary discussions" with the rebels on conditions to resume operations and is "planning as if there will be some damage to our facilities." Hess declined to comment.
Fears over insecurity--particularly after the opposition's military chief Abdel-Fattah Younis was killed apparently by fellow rebels--also may lead companies to think twice before they return their staff to Libya.
"The removal of the common threat of Gadhafi will be likely to highlight the ongoing tensions between the various diffuse, armed militias and political leaderships throughout Libya," said Henry Smith, Libya analyst at consultancy Control Risks.
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com
--David Roman and Ilan Brat in Madrid, Geraldine Amiel in Paris, Nicole Lundeen in Vienna, Jan Hromadko in Frankfurt, Isabel Ordonez in Houston and Alexis Flynn in London contributed to this article.
(END) Dow Jones Newswires
22-08-11 1805GMT
