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Page added on August 25, 2011

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Libya Oil Industry May Fast Recover

Production

Libya’s oil industry should be able to recover fairly quickly after fighting ends, but it might take a year or two to reach pre-rebellion production levels, analysts say.

If the country can establish political stability, Libya could begin producing 250,000 to 300,000 barrels a day within several months, says Samuel Ciszuk, an analyst at consulting firm IHS Energy. Reaching pre-war levels of 1.6 million barrels a day will take a year or more, he says. Most production was stopped by widespread violence.

Restoring Libya’s oil production would help stabilize prices and be good news for motorists, who could see modest price drops immediately, energy analysts say.

Unlike in Iraq, where the oil industry was devastated by economic sanctions and struggled for years to rebuild, Libya’s infrastructure is in good shape and has benefited from Western investment, says Amy Jaffe, an analyst at the Baker Institute for Public Policy at Rice University.

Even so, Libya’s ability to ramp up oil production will depend on how much damage was done to refineries and port facilities and what type of government is established.

Rebels struggled Wednesday to get control of Libya’s capital. Their leaders established a national government in Tripoli even as clashes with regime loyalists continued. The rebels put a $1.67 million bounty on missing strongman Moammar Gadhafi.

Months of fighting have rattled world oil markets. The United States imports less than 1% of its oil from Libya, but European countries, including France and Italy, depend heavily on Libyan oil.

Libya’s former oil minister, Shokri Ghanem, says the country could probably restore production within a few months and reach pre-rebellion levels in about two years, according to Platts, an oil industry information service.

A precise forecast won’t be available until engineers survey equipment and oil fields.

“A lot of these facilities haven’t had eyes on them by experts in several months,” says Christopher Guith, an energy specialist at the U.S. Chamber of Commerce. “No one knows the state of those fields and the state of the infrastructure.”

Rebels and loyalists fought some of the fiercest battles around Ras Lanouf, Brega and Zawiya, cities with major refineries. Fires broke out at some of the facilities during the fighting.

European firms have been active in Libya for years. U.S. companies went in after sanctions were lifted in 2003, when Gadhafi agreed to dismantle Libya’s weapons of mass destruction.

Foreign employees, who left when fighting started, will be eager to return if Libya is stable, says Al Hegburg of the Center for Strategic and International Studies.

A key attraction for oil companies is Libya’s potential. Before Gadhafi took power, Libya was producing about 3 million barrels a day, nearly twice what it produced during his regime.

Guith says, “It is definitely a good opportunity for oil exploration companies.”

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One Comment on "Libya Oil Industry May Fast Recover"

  1. DC on Fri, 26th Aug 2011 6:38 am 

    Really, the same way Iraqs was supposed to but never did with all those hyper-compotent amerikans running the show?

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