Libya's prospects hinge on restoring oil supply

Thu, Sep 8, 2011, 01:00

BUILT WITH oil money in the 1980s, the Dhat El Imad complex on Tripoli’s seafront is one of the most distinctive elements of the Libyan capital’s skyline. Its five honeycomb-shaped towers, arranged in a circle, house banks and airline headquarters, as well as the offices of many foreign oil companies operating in Libya.

Libyan employees of many of those firms returned to work last weekend in what feels and looks like a very different Tripoli, a very different Libya.

In several of the Dhat El Imad towers, doors and walls are adorned with stickers and posters in the red, black and green of the pre-Gadafy flag adopted by the interim government forces. Armed youths, called thowar, Arabic for revolutionaries, stand guard in the lobbies.

In an office overlooking the Mediterranean, a project manager for the Libyan partner of a multinational oil company mulls over the future.

“Like everyone, I’m still in shock over what has happened, and how quickly it came to pass. We cannot waste this opportunity to ensure we build the country we always dreamt of. For the oil business, which is so important for Libya’s future, the challenge now is how we get back to oil production as soon as possible.”

He says expatriate colleagues are expected back in the country within days. Foreign employees of major Italian, French, US and Spanish oil companies with a presence in Libya left shortly after the first protests against Gadafy’s regime erupted in mid-February.

The manager predicts one of the company’s oil fields, shut since late February, will resume operations within weeks. “We will bring back staff and our contractors, assess whatever damage may have been done, and then get back to production.”

Much of Libya’s future prospects hinge on how it new leaders resuscitate the oil sector, which accounts for about 95 per cent of the country’s revenues and will help power the creation of a new state from the ashes of Gadafy’s idiosyncratic rule.

Its interim government, the National Transitional Council, is upbeat. Ali Tarhouni, the council’s urbane oil and finance minister, said last week that six months of war appeared to have damaged only “about 10 per cent” of Libya’s oil infrastructure. He noted that Gadafy’s forces had not blown up or set alight key facilities – such as the refinery in the town of Zawiyah, just west of Tripoli – as they retreated from the rebels’ lightning advance.

Libya’s oil production, which had fallen dramatically since February, dropped last month to an all-time low of some 60,000 barrels a day. That compares with 1.6 million barrels a day in January. Tarhouni has predicted Libya could pump about 500,000 barrels of oil a day within four months and return to pre-revolt levels within a year. Ireland will be watching with interest.

Figures released by the International Energy Agency show the State is the OECD country most reliant on supplies of crude oil from Libya. Last year, 23.3 per cent of Ireland’s crude oil imports were sourced from Libya, which amounts to about 14,000 barrels of oil imported every day.

Analysts view the council’s estimates regarding the indigenous oil industry’s recovery as overly optimistic, with some cautioning it could take up to three years to return to 1.6 million barrels a days.

Libya’s new leaders have said they will honour standing contracts signed with major foreign oil companies. But they have also stressed that the country’s oil sector will be run very differently compared with the past, and that they may open up bids to new players such as China and Malaysia.

“We want to do away with the shadowy, corrupt way which Gadafy and his cronies ran the oil business,” the council’s London representative Guma el-Gamaty said last week. “Contracts will be awarded on merit, not on political favours.”

The project manager in the Dhat El Imad office welcomes this break with the past. He believes it unlikely preference will be given to countries that supported the Nato-led intervention in Libya.

“We have to look after Libyan interests first. You cannot say that we should forget such and such a country because they did not support us over the past six months. This is business.”

The impact of revolution on so many elements of Libyan life is only just starting to make itself felt, and much will begin to emerge only in the weeks and months to come. Evidence of the tentative reordering of Libyan society appears in the most unexpected places. On the concourse of the Dhat El Imad complex, I meet a group of women, all employees of the Libyan arm of a major European oil company. One is wearing the rebels’ tricolour as hijab.

They tell me that on their first day back at work last Sunday they voted, along with a majority of colleagues, to get rid of pro-Gadafy managers. “We were waiting for this moment,” says one, beaming. “It was like a mini-revolution.”