O&G Companies Monitoring Libya As Rebels Roll into Tripoli
Oil and gas companies with operations in Libya are monitoring the country's political situation as rebels have taken control of most of Tripoli. A number of companies shut down operations and pulled workers from Libya earlier this year following the uprising against Moammar Qadhafi and resulting civil war.
German oil and gas operator Wintershall said in a statement, "We are monitoring the situation very closely. Our care is continually directed towards our Libyan staff, especially in Tripolis. We hope that the violent conflicts will end soon."
"For safety reasons Wintershall shut down and safely sealed off oil production operations in the desert at the end of February. No oil has been produced there since. Our international employees have been flown out of the country. The local staff who have remained in Libya are looking after the production facilities in the desert."
"At the moment it is too early to predict when, how and under what conditions the production in Libya might begin again. Starting up production could be done within several weeks under standard technical conditions. This of course depends on the state of the export infrastructure as well as a stable security situation in the country."
A spokesperson with Austria-based OMV said the company is monitoring the situation closely, but cannot confirm when its production of 33,000 BOE/d will resume.
When conditions allow, BP intends to resume plans to drill its first exploration well in Libya. The company originally planned to begin drilling in February of this year, but was forced to suspend operations due to the political situation in Libya.
The key question is how the Benghai-based National Transitional Council (NTC) will govern Libya, Barclays Capital noted in a report today, seeing potential for a major political and security power vacuum remaining elevated. "Gaddafi has ruled Libya with an iron grip for over 40 years, and there are very few functioning institutions able to immediately step in and run the country in his absence," Barclays said. NTC's victory was facilitated by a substantial NATO airpower, and it could be very difficult for it to govern Libya without international assistance.
The rebels themselves also remain a mystery, with the NTC including several former members of the Gaddafi government, leading to concerns that it may not mark a clean break with the old order. These concerns, and the recent assassination of the rebel military commander Abdul Fatah Younis, suspected as a double agent, points to significant disunity in the rebel ranks. In turn, international oil companies will likely be reluctant to restart operations in a volatile security and political environment, Barclays noted.
The first task of a new Libyan government will be to repair damages caused to the oilfields and other oil installations by a lack of investment funds, imported spare parts and equipment, and insufficient maintenance. The second task will be to negotiate with foreign oil companies the terms of production-sharing agreements for investments and operations in new and old oilfields, Barclays said, and in some cases, to re-negotiate deals already signed by the current Libyan government, which will be more complicated than the market expects.
"In conclusion, the problems of Libya will not necessarily be solved by the departure of Gaddafi; indeed, that might just be the start of some long-lived difficulties," Barclays said. "A sudden wave of market bearishness, in the expectation of a swift return of production and then a further wave of extra production, is a view likely to be given up gradually as the new reality proves to be far more complicated."