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Libyan oil to fuel the revolution's future

Libyan oil to fuel the revolution's future
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As the sun sets on Gaddafi’s regime, behind the scenes moves are afoot to get the country’s oil industry up and running again. It is key for the financial health of the new government and the success of the revolution.

Libya’s oil production has been at a virtual standstill since the uprising began back in February.

Before the conflict, Libya produced 1.6 million barrels a day, but the country has the potential to produce much, much more.

The country has reserves estimated at some 44 billion barrels, the largest in Africa, but it is under exploited. Libya is only the fourth biggest oil producer/exporter from the continent, 85 percent of which finds its way to Europe.

Foreign oil companies are chomping at the bit to get a piece of the action, but even they admit that it is too early to consider restoring output.

The Italian oil giant ENI has been in almost daily contact with the higher echelons of the rebellion, eager not to loose its place in the pecking order. Formally ENI was the biggest foreign oil producer in the country, but others are now in the running.

Experts predict that it will take the country two years to reach full-output. ENI are there, but the French firm Total could be rewarded after strong French support for the uprising.

Also in the running Qatar Petroleum and the Swiss company Vitol, Britain’s BP and Austria’s OMV alongside the Anglo-Dutch Shell and Conocophillips from the US.

Russia and China may well loose out after failing to back international moves to support the rebels. Both were big players in the country under Gaddafi, but their future role is in doubt. Still contracts signed by Gaddafi will be honoured.

Ahmed Jehani is a rebel representative for reconstruction: “All lawful contracts will be honoured whether they are in gas or oil, at the moment it is not for this government to decide to revoke any contracts.”

Politics will play a major role in the issue and those that have physically backed the revolution will be waiting in line for their post-war rewards.

Libyan oil to fund change, but who benefits?

Muammar Gaddafi’s 42-year rule over Libya was  based on fear and bankrolled by oil.
The new rebel government will need the earnings from the country’s vast stocks of high grade crude.
To discuss the future of the Libyan oil industry euronews’ Stefan Grobe spoke to Jan Randolph of IHS Global Insight.
euronews: “Jan, the post-war oil race has already started, with multinationals like ENI and Total leading the charge back into Libya. Are the Italian and French companies going to be the winners of the anti-Gaddafi revolution?”
Jan Randolph: “I certainly think so. I think the interim government will want to honour the existing contracts, although they do have the right to reopen them as a new sovereign [government]. I think those that have investments there already will be allowed to resume operations and then I think also because the Europeans, particularly the French and the British, were spearheading the rebel cause from the beginning, they will be looked upon advantageously in terms of new contracts.”
euronews: “On the other hand, some comments from Libyan rebels seem to suggest that countries which opposed tough sanctions on Gaddafi could suffer a setback. So, are Russia, China – and potentially Germany – going to have to foot the political bill of the revolution?”
Jan Randolph: “Well, that’s interesting, some of the rebels have been saying that. The Russians and the Chinese contracts - and they were very late in the game here – but they do have a foothold; the Chinese National Oil Company and Gazprom, for example, did have some licenses. I think they did, however, not veto the UN move to secure safety for civilians. But at the same time, they did complain about NATO overstepping the UN mandate. Yes, I think, it’s obvious that the Europeans will be advantaged. It’s the closest market, it’s where all the business is to be done. And I think they will pursue that line.”
euronews: “Let’s talk about money. Any rehabilitation and reconstruction of the oil and gas sector needs funding, probably massive funding. Is that going to be a problem for Libya given the current state of capital markets?”
Jan Randolph: “I honestly don’t think so. I think Libya has a huge advantage here. There is very little external debt, less than one billion. Western banks didn’t want to lend to Libya, and Gaddafi wasn’t really a heavy borrower, he was more a xenophobic autocrat who hoarded gold and foreign exchange. We estimate about 60 billion dollars worth of gold and foreign exchange. And on top of that, they built a sovereign wealth fund from past export surpluses, they built up the sovereign wealth fund - the Libyan Investment Authority - and that has assets of 60 billion dollars. So we are talking about more than 120 billion dollars of assets, including a lot of liquid assets that could quickly be disbursed for rehabilitation and also reconstruction.”
euronews: “Of course, all that depends on security and stability in Libya. Let’s assume that all goes smoothly in the future, will the resumption of the Libyan energy business have a cooling effect on oil prices?”
Jan Randolph: “Libya is an important oil and gas producer, but really only contributes even at full potential, about two or three percent to the global supply chain of oil and gas. So, it might have a very minimal effect on where the global oil price goes. We have seen recent falls in the oil price, but that has a lot more to do with the global economy and global oil demand conditions, the cooling of emerging market economies, the cooling of growth in Europe and the United States. This has a more fundamental and profound effect in taking the wind out of (reducing) the oil price, it had less to do with the turn of events in Libya.”