Wednesday, 16 November 2011

Spared in War, Libya’s Oil Flow Is Surging Back

Tyler Hicks/The New York Times
At the oil refinery in Zawiyah, rebels soldered valves closed and stationed guards for protection. 

ZAWIYAH, Libya — The bullet holes in the oil tanks have been patched, the damaged backup generator is being repaired, and most important, the pipeline that feeds the giant oil refinery here has been reopened. 

Oil production is quickly being restored in Zawiyah and around the country, in large part because both the Qaddafi regime and the former rebels, now the interim leaders of Libya, took pains to avoid permanently crippling the country’s most important industry during their six-month civil war.
“Qaddafi wanted to keep the refinery going because he needed the fuel, and the rebels wanted the refinery safe because it belongs to the Libyan people,” said Khaled Rashed, shift coordinator at the Zawiyah refinery’s control room.
Libya’s oil production remains at about 40 percent of the level that it was before the revolution began. But none of the country’s 40 critical oil and gas fields were seriously damaged in the war, according to Libyan officials and international oil experts. Now, most of the important oil ports and refineries, virtually idled by international sanctions and months of fighting, are ramping back up.
Officials boldly predict that by June, the country will once again be pumping 1.6 million barrels of oil a day, although independent experts say that is conceivable only if the country can avoid a relapse into violence.
The industry’s rapid pace of recovery is a beacon of hope at a time when the interim government is struggling to disarm militias, prevent competing tribes from fighting each other, and rebuild shattered cities.
Oil is the mother’s milk of Libya’s economy — before the war, it accounted for about one-quarter of the country’s economic output, 80 percent of government revenue and 95 percent of export earnings, according to United States government estimates.
“In a country like Libya, oil is everything,” said Paolo Scaroni, the chief executive of Eni, the Italian oil company that is by far the biggest foreign producer here. “At the end of the day, the government spends most of its time taking care of oil.”
Unless oil production returns to preconflict levels, the country’s economy and political stability will suffer. Conversely, if oil output increases substantially, Libya’s 6.6 million people could become quite wealthy — unlike those in poorer countries whose governments toppled during the Arab Spring. Egypt’s economy, for example, has stagnated since the collapse of the Mubarak regime.
Corruption remains a risk. Members of the new Libyan government accuse Col. Muammar el-Qaddafi of stealing billions of dollars in oil revenue. The acting oil minister, Ali Tarhouni, said authorities were investigating more than 20 bank accounts of the National Oil Company for fraud. “We will follow every penny,” he said.
With world oil prices near $100 a barrel, restoring Libyan oil production would also ease supply pressures on global markets.
Foreign oil experts caution that even to get production back over a million barrels a day, Libya’s interim leaders must end the violence that is deterring foreign oil companies from bringing back expatriate technicians. In a report last week, the International Energy Agency predicted that Libyan oil production would be only 1.2 million barrels a day by the end of 2012.
Last week, at least six people were killed in a firefight between two rival militias that occurred around Zawiyah. In the southwestern desert, where some of the largest oil fields are, there was a standoff recently between one militia and Tuareg tribesmen who raided a Qaddafi arms depot and stole some mortars.
Eni, Total of France and Repsol of Spain have begun to send in a trickle of staff, mostly to restart offshore Mediterranean fields far from any violence. BP, which had planned promising exploration projects, has so far declined to send anyone back.

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