After Libya's civil war, experts pessimistically predicted a recovery in the country's oil industry could stretch on for as long as three years. Work camps had been looted and left bereft of phone and internet links, export terminals were damaged and at one point in the fighting, production fell to 45,000 barrels per day (bpd), less than 3 percent of the usual 1.6 million bpd.
Yet, seven months later, Libya is already pumping 1.5 million bpd and expects to hit pre-war levels by next month. Its rapid recovery raises a question about the future of the nation with Africa's biggest known oil reserves, at 46 billion barrels: can Libya double its production to 3 million bpd - a level it last pumped more than 40 years ago - and launch itself into the league of Opec's major producers?
"Libya has the potential to become an energy or petrochemicals hub but it was deprived for 40 years to reach its potential," says Ahmed Shawki, the head of marketing for Libya's National Oil Corporation (NOC). "The oil sector has been very scattered since its establishment - many crudes, many companies."
The future of Libya's oil industry has bearing on the country's stability and international energy markets alike. The loss of Libya's prized sweet crude, which accounted for just under 2 percent of world supply before the war, sent oil prices shooting up last year to US$127. At the time, that price was a three-year high. And the Libyan government is relying upon the US$45 billion (Dh165.28bn) it expects to make from oil and gas this year for its $68bn budget to fund salaries and the development of infrastructure in sectors including health care and communications.
Whether Libya can go beyond its pre-war target depends on an ongoing contract review, the willingness of international companies to enter a nation that analysts say has the potential to fracture into three, and elections next month for the national assembly that is to draft the country's new constitution.
Libya last hit 3 million bpd four decades ago, and NOC executives have dreamt of reaching that level again - a rate that would put the country in the league of Iran and Iraq, Opec's top two producers after Saudi Arabia. Officials even hoped to be sitting on an extra 8.2 billion barrels of undiscovered reserves suggested by independent surveys. But during the Qaddafi era, sanctions and political isolation hampered production and stringent contract terms did not motivate exploration by foreign partners.
"I would not call the partnership we had as a full partnership," Fareed Salem, the vice president of business development for Conoco Phillips in the Middle East and North Africa, said at a conference in Dubai recently. The terms of such partnerships are expected to change by 2015, when the NOC plans to rewrite exploration and production policies.
"We do sense a new spirit and a new energy of doing things," says Mr Salem. "This is something that we had envisioned back in 2005 that in reality we were not able to do." Still, hurdles remain.
To pump 3 million bpd by 2015, Libya needs to invest $30bn, estimates Christophe Lecourtier, the director general of UbiFrance, France's trade commission. Such funds may be hard to find, given the uncertainty in Libya, where the bourse remains closed. Of the billions of dollars in assets frozen last year to target the Qaddafi regime, only 60 to 70 percent have been released, according to the National Transitional Council (NTC), the temporary government set up last year by Libya's victorious rebels. Meanwhile, a review of nearly 10,000 government contracts is ongoing. Although the NTC has assured companies the process will not be revisionist, the extent of the review is not yet clear.
Basic improvements in the oil sector are still needed, including replacing four-wheel-drive vehicles taken by fighters during the war, reinstalling phone and internet lines and establishing security for export installations, said Abdulbaset Abadi, a member of the oil committee on the NTC.
Although the NOC says Libya is adequately stable, its subsidiary Agoco was rocked by labour protests earlier this year and this month, a candidate was killed shortly after submitting his registration to run in the national elections. "We have to be patient," said Mustafa El Huni, the deputy chairman of the NTC. "It will take time - maybe 10, 15, 20 years - to fix the Libya that Qaddafi created."
(Source: AlBawaba)
