Libyan oil output 'under threat in opposition areas'

1st March 2011, Comments 0 comments

Libya's oil fields are largely in the control of opposition forces and it is unlikely that production will return to normal in the near future, analysts say.

The most serious revolt against Moamer Kadhafi's rule in four decades has brought most of Libya's oil production of around 1.6 million barrels a day to a standstill.

Catherine Hunter of IHS Global Insight said the eastern part of the country which is now in the hands of a loosely coordinated opposition "includes one of Libya's four main producing areas, the Sirte Basin".

Eastern Libya accounts for about two-thirds -- about one million barrels a day -- of Libya's production.

Hunter warned that the lack of certainty over who was in charge of the opposition-held areas meant it was impossible to reliably predict the near-term performance of the oil fields.

"The risk remains that the lack of alternative institutions outside the Kadhafi regime will lead to a prolonged breakdown in authority, while decision-making structures are rebuilt and political settlements sought, perhaps complicated by control of strategic infrastructure such as oil," she said.

Jochen Hitzfeld, of UniCredit Bank, said a sharp fall in Libya's oil production was inevitable, not least because many of the key workers have fled the violence.

"Even if Kadhafi were to be toppled, Libya will see its oil production plummet in the coming weeks," Hitzfeld concluded.

Libya's oil sector relies heavily on foreign expertise, said David Hufton of London-based broker PVM Oil Associates, so "it is reasonable to conclude that virtually all production has been wound down and that there are difficulties shipping any volumes available for export".

Elite British special forces were reportedly involved in helping to evacuate hundreds of foreign nationals at remote desert oil facilities, ferrying them out of the country in RAF Hercules planes at the weekend.

Hufton added: "The immediate short-term issue for the oil markets is the price reaction that will follow the overthrow or death of Colonel Kadhafi.

"What matters is what follows, will the country fall into civil war making it unsafe for foreign workers to re-enter and get all the facilities up and running again or will calm prevail and normality return quickly?"

In the opposition-held eastern city of Benghazi, forces said Monday they were resuming oil exports suspended during anti-regime protests.

A tanker was loaded in the country's second city -- where Kadhafi no longer has any control -- with one million barrels of crude bound for China.

The tanker was the first cargo of crude to sail from Libya since February 19.

Some 85 percent of Libya's oil production goes to Europe, according to the International Energy Agency.

© 2011 AFP

0 Comments To This Article