Libya oil output facing uncertain future in post-Kadhafi era

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Libyan oil output remains shrouded in uncertainty but it could take six months to gradually return to normal, analysts said, as rebel forces looked set to bring Moamer Kadhafi's 42-year rule to an end.

Jubilant rebel forces stormed the symbolic heart of Tripoli on Sunday and fighting continued to rage on Monday near the compound of Kadhafi and in other parts of the capital city, as the end-game neared after six months of fighting.

Libya, a key African oil exporter, produced about 1.6 million barrels per day (bpd) before the rebellion broke out in mid-February -- but this has long since slowed to a trickle.

Analysts expressed uncertainty over the state of the north African country's oil infrastructure.

"We do not know what is the state of installations -- if they are damaged or how much the crude exports facilities were hit. The actual physical damage is the main question," said Dr Manouchechr Takin, head of research at the Centre for Global Energy Studies (CGES) consultancy in London.

"If there is no serious damage physically, and if things come back to normal on the political front, with a stable administration... probably it would be, I would say, six months before the Libyan oil production gets back to normal."

Takin added that it would also take time for international oil companies like BP, Eni and Repsol to move their expatriate staff back into Libya because of the uncertain security situation.

"It's not clear when they will be ready to send their non-Libyan staff back there," he said.

"Will there be peace and safety for technical people to go to the fields and operate, or would [there] be sabotages, etc? We do not know."

Energy analyst Neil Atkinson, at consultancy Datamonitor, said the main obstacle appeared to be logistical, adding that it was unclear how quickly the Libyan opposition would be able to assemble a functioning oil ministry.

"From what we have read anecdotally, it seems that the damage to production areas has been relatively limited -- because of course most of the production takes place in very remote areas in Libya, it's nowhere near near major cities or towns -- so there has not been significant damage.

"The issue may be more to do with organisation and logistics because ... it's not as if the Kadhafi regime was replaced today, by a coherent functioning happy bunch of people tomorrow, where everything immediately goes back to normal.

"There are a lot of deep divisions in the opposition forces, and it may well be that they cannot get a functioning oil ministry up and running very soon and they cannot restaff the Libyan National Oil Corp. soon.

But Atkinson also estimated that production would take around six months to recover to pre-revolution levels.

"I would give it six months ... I do not see why it could not resume relatively quickly.

"Not much less, to be fair -- but I don't see why, unless we find there has been extensive damage to production infrastructure and the pipelines that move the oil from there to the loading terminals, or to the domestic refineries... and on the assumption the fighting ends."

However, SEB commodity analyst Filip Petersson sounded a note of caution over the high level of uncertainty, arguing it could take "much longer" than a few months to recover full output levels.

"Limited production could be up and running in months but reaching full capacity will take much longer," he told AFP.

"However, if or when Kadhafi falls, the euphoria could be short lived since it is highly uncertain what will follow. The civil war could continue when the common enemy for the rebels is gone.

"In the short term the development we are seeing now is therefore likely to continue but setbacks could come and the final correction is unlikely to be seen before oil starts to flow again and the political situation has stabilized."

Around 85 percent of Libyan oil output was exported to Europe until the revolt disrupted the country's production.

Brent crude from the North Sea would be particularly affected by the likelihood of Libya gradually resuming supplies to the European market, analysts said.

"It's 1.6 million barrels per day of predominantly high quality light sweet crude, which is in higher demand than most other crudes because you get a better gasoline and diesel yield from it," added Atkinson.

"The bulk of the Libyan crude is being supplied to European refineries so it was Europe that was mainly affected by it."

In reaction early on Monday, Brent oil prices had briefly tumbled by more than three dollars per barrel after news of the storming of Tripoli.

However, Brent prices have recovered somewhat amid doubts over the timing of the resumption of Libyan exports, while New York crude futures remain weighed down by abundant stockpiles in the US midwest.

© 2011 AFP

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