Libya has made early strides in restoring oil production, but returning to pre-war levels will prove a daunting and difficult challenge.
Opinions differ on the pace of redevelopment. Oil market analyst Petromatrix says Libya could realistically produce 250,000 barrels per day (bpd) of crude by mid-October, and 400,000 bpd by end of 2011.
Abdullah el-Badri, the Benghazi-born Secretary General of OPEC, told a news conference last week that he expects Libyan oil production will hit 1 million barrels per day rapidly – the latest OPEC report estimates within six months – with pre-war production of 1.6 million bpd returning within 15 months.
Libya’s Agoco confirms it is currently producing 150,000 bpd of oil, which it expects to increase to 200,000 bpd next month. Agoco also said damage to power stations supplying oil facilities mean it could take 3-4 months to reach 350,000 bpd pre-war level at Sarir.
Total confirmed on 23 September that production has resumed at its al-Jurf offshore field. The platform is located in the Mediterranean about 100 kilometres off Libya’s western coast. The field accounted for 40,000 bpd of Total’s 55,000 bpd production capacity before the war, and is estimated by a company spokesman to resume exports in two weeks with full production back within a week or so more.
Eni, the foreign oil company with the biggest stake in Libya at pre-war production at 244,000 bpd, have not yet estimated when the other major offshore oilfield, Bouri, will restart, but believes it will happen more quickly than onshore fields. The company has put some foreign oil workers on the ground to appraise onshore facilities.
US firms such as Hess and Marathon have so far largely stayed away, put off by the remnants of the international sanctions regime targeting the Gaddafi regime and ongoing concerns about the security of oil assets in Libya’s sprawling, unforgiving desert landscape. Recent reports from the US that the terrorist group Al-Qaeda in the Islamic Magreb has seized Libyan surface-to-air rocket launchers and intends to target oil charter flights does not help matters.
Security
The most immediate challenge to the foreign oil companies on which Libya relies for oil revenue is security, which remains extremely poor at key production and export facilities.
The political situation in Libya is such that operators cannot solve this by importing their own private security. Ali Tarhouni, interim Libyan oil minister while the National Transitional Council appoints an interim government, told reporters that “if security is good enough for Libyans it should be good enough for foreign workers.”
Instead, Libyans are looking to take a lead on providing security, though poor resources and a lack of training make them unsuited the task for now. The NTC set up a series of oil squads to guard oil fields, but the groups remain under-resourced. Tarhouni told reporters he wants to see the force grown to around 5,000, though this will take time and IOCs are unlikely to compromise their staff in the interim.
While Gaddafi continues his improbable stand against interim government forces, he has not yet followed through on this threats to wreak his revenge by destroying Libya’s oil industry. However, while the Colonel remains at large and commands a rump of loyalist fighters – or mercenaries – the chance of attacks on the county’s poorly secured oil facilities remains, increasingly so as his position grows yet more desperate.
Austrian producer OMV, which before the war owed 10% of total production to Libyan fields, told the markets on Friday that the crises in Libya and Yemen will limit group-wide production to under 300,000 bpd in 2011, according to CEO Gerhard Roiss.
“The jury is still out on whether we can actually physically go back int the field and actually recommence production,” Roiss told Reuters, while emphasising that OMV will remain committed to Libya long-term.
The company is looking to send small technical teams to their concessions in the next week or so, to appraise damage and looting to ancillary facilities such as camps and vehicles.
“Most of the contractors’ and our camps have been looted,” Roiss told Reuters. “There are no cars, not kitchen, no food, no beds, no laptops; nothing.”
Roiss believes it will take 12-18 months to to restore the firm’s pre-war production level of 33,000 bpd from the Shateira field in February, the only field at which it acts as operator.
Sirte Oil, a subsidiary of the National Oil Company, is also holding off on sending staff back to facilities on the basis of safety fears.
“we are finding something new every day,” says Sirte Oil’s chairman Fathi Isaa. “We will bring back all the oil workers once it is safe.”
Export facilities
While oil fields have escaped with only minor damage – not least because of their locations deep within Libya’s desert – the coastline export and refining facilities have been hit hard by the conflict, as key oil towns saw some of the fiercest fighting of the war. Tarhouni estimates that around 10-15% of Libya’s oil infrastructure was damaged in the war, and most of this looks to have been visited on coastal areas.
The Ras Lanuf oil terminal in eastern Libya, which contains export facilities and a hydroskimming refinery capable of producing 220,000 barrels per day (bpd) of refined products before the war, was attacked by pro-Gaddafi forces on 12 September. The attack left 12 dead and concerns that the area is littered with unexploded mines and other ordnance.
Oil facilities at Brega, also in eastern Libya, has seen extensive damage and the Zawiya refinery in western Libya and the massive Es-Sider terminal in central Libya are also damaged, reports the Wall Street Journal. The NTC reports that around 40,000 mines were planted around Brega by Gaddafi’s forces.
Issa also says the gas fields at Hateiba near Brega were sabotaged by Gaddafi’s men and is not yet operating to capacity, with gas much needed for domestic power generation. The NTC wants to place greater emphasis on gas production as a means of meeting an expected upswing in domestic demand as a more prosperous Libya emerges from the ashes of Gaddafi’s regime.
Pipelines
One concern, articulated by Gavin de Salis, chairman of oilfield maintenance and construction firm OPS International, was that waxy Libyan crude left static in pipelines would cake or even block pipelines.
“Libyan crude is quite waxy,” de Salis told Reuters in August. “If a pipeline has been left inactive for a long time it might become plugged up.”
However, Libyan engineers appear to have pre-empted this problem. Engineers in the Sarir field mixed waxy crude with thinner oil, with the resultant blend pumping to the Tobruk terminal for export.
