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Libyan oil needs two years to recover
by Staff Writers
Benghazi, Libya (UPI) Sep 22, 2011

Libya's oil industry, lynchpin of the North African country's economy, isn't expected to return to its pre-civil war production level of 1.6 million barrels per day for at least two years.

Libya earned $44 billion from oil exports in 2010, the U.S. Department of Energy said.

The country's long-term prosperity lies in large part on its energy industry. But six months of fighting between rebel forces and Moammar Gadhafi's regime has reduced oil output to a trickle of little more than 50,000 bpd.

The International Energy Agency says that it will likely take until 2013 to repair the damage to oil installations, such as wells, pipelines and terminals.

Some projections indicate Libya should be producing 250,000-500,000 bpd by the end of this year, 1 million bpd by second quarter 2013 and 2.4 million bpd by 2015, far more than its pre-war volume.

Libyan oil production peaked at 3 million bpd in the 1960s, before Gadhafi's military coup in September 1969 but has been largely in decline since.

However, even before Gadhafi was ousted, Libya was aiming to boost its reserves and there were plans to restore production at 3 million bpd by 2017.

Most of the damage is in the eastern oil fields, which contain around 80 percent of Libya's reserves of 46 billion barrels. That's the largest in Africa and the ninth largest in the world.

Libya also has natural gas reserves estimated almost 55 trillion cubic feet.

"Libya cannot afford to sit on its sovereign wealth," declared John Hamilton of the Cross Border Information research group. "The bill for rebuilding the country will be enormous … It has to get oil production up and running."

The National Transition Council, widely recognized as the Libyan national authority, estimates that reconstruction could cost $200 billion over the next 10 years as the country rebuilds its infrastructure, starting with the energy industry.

The extent of the damage to energy infrastructure isn't entirely clear even as pockets of Gadhafi's die-hard loyalists are rolled up by NTC forces.

The council's oil and finance minister, Ali Tarhouni, estimated that only as much as 20 percent of installations had been damaged.

But Nuri Berruien, chairman of the state-owned National Oil Co., said there was serious damage to support infrastructure, most notably export terminals along the Mediterranean coast.

None of the country's five refineries are operating, although that seems to be largely because the oil flow was halted during the fighting and hasn't been fully restored.

Tarhouni, a former economics professor at the University of Washington in Seattle who returned in March after 40 years in exile, says production at the big al-Sarir field in eastern Libya and Mesla in the south will begin any day. He expects initial production to amount to 160,000 bpd.

There are concerns about minefields around the export terminal at Brega in the east, which also houses a refinery and a petrochemical plant. An estimated 40,000 anti-personnel and anti-tank mines were laid around the town on the Gulf of Sidra.

Storage tanks were damaged at Libya's largest terminal at Es-Sider.

A few days ago, Gadhafi loyalists launched two attacks on the coastal refinery at Ras Lanuf, 380 miles southeast of Tripoli and near the Gadhafi stronghold of Sirte, in an apparent attempt to sabotage the efforts to restore the energy industry. The facility was set on fire.

The raids underlined the capacity of Gadhafi's forces to mount assaults even though they are largely penned up in several bastions. Efforts to restore the oil industry will be jeopardized until the NTC can crush the loyalist holdouts.

Still, the international oil companies that the Libyans depend on to keep the oil and natural gas flowing are pouring back even though they stress that full resumption of operations depends on good security.

Italian oil giant ENI, one of the major producers in Libya, expects to reopen its Greenstream gas pipeline across the Mediterranean from Libya's Wafa field near the Algerian border by Oct. 15.

That would mark the comeback of the first foreign-led energy operation since Gadhafi was ousted from Tripoli Aug. 23. Greenstream provides 10 percent of Italy's gas requirements.

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