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Oil companies scramble for Libya's riches
by Staff Writers
Tripoli, Libya (UPI) Aug 25, 2011

U.S., European and Asian companies are scrambling to get back into Libya to grab a slice of its oil wealth, even though Moammar Gadhafi's diehard loyalists refuse to submit to seemingly triumphant rebel forces.

Firms from Britain, France and Italy, the rebel coalition's most ardent supporters against Gadhafi in Libya's civil war, are the likely front-runners. BP of the United Kingdom, Total of France and ENI of Italy had major projects in Libya before the rebellion against Gadhafi began six months ago.

ENI was producing 196,000 barrels per day before the war. It was returning technicians to Libya even before Gadhafi's fortified compound in Tripoli was overrun by rebels this week, so it may be the first to resume production.

BP is likely to push to launch a $1 billion deep-water exploration program in the Gulf of Sidra, part of a $900 million deal signed with Gadhafi in May 2007. Drilling was delayed in 2010 following the company's Gulf of Mexico disaster. It had been scheduled to start this year but the war prevented that.

Libya needs a major strike like that because production at most of its mature fields is declining. The country has reserves of 41.5 billion barrels, the ninth largest in the world.

Britain, France and Italy have a long history of involvement in Libya, which from 1911 comprised Italian colonies in Tripolitania and Cyrenaica and a French one in Fezzan.

These were conquered by the British in 1943. Libya gained its independence under King Idris I in 1951. He was overthrown in a bloodless military coup led by Gadhafi and other officers in September 1969.

Following the discovery of oil in Libya in 1959, U.S., British and Italian oil companies were at the forefront of the country's emergent oil industry, nationalized after the 1969 coup.

Britain and France were driving forces behind the intervention by NATO forces to support the rebels after the uprising broke out in February. France was the first Western state to recognize the rebel National Transitional Council.

For three decades, Gadhafi was the sworn enemy of the West because of his support for international terrorism.

It was only after he surrendered his clandestine nuclear program in 2003 and renounced terrorism, that foreign oil companies were allowed back into Libya.

Gadhafi needed them to salvage Libya's all-important oil industry, just as the rebel coalition does now.

In 2003, the oil industry was, and remains today, Libya's economic lifeline. But back then it had come to a virtual standstill because of international sanctions that were lifted in 2004.

Libya produces high-quality "sweet" crude that is highly prized because it needs little refining.

China, which is grabbing oil deals across Africa and increasingly the Middle East as well to fuel its ever-expanding economy, could also be a key player in the months ahead.

Beijing didn't support NATO intervention in the Libyan conflict. But Chinese emissaries made their first contact with the anti-Gadhafi rebels in early March in the Persian Gulf state of Qatar, a key rebel ally.

Beijing clearly had its eyes on Libyan oil and wanted to establish links with the insurgents under Mustafa Abdel Jalil, the chairman of the National Transitional Council, in case they triumphed over Gadhafi.

On Monday, as Gadhafi's embattled forces seemed to making a last stand, Chinese Foreign Ministry spokesman Ma Zhaoxu noted that Beijing "respects the choice of the Libyan people" and was ready to participate in the country's reconstruction.

It remains to be seen whether the NTC, a coalition of groups with widely differing agendas, will be able to work together to produce a coherent government and economic policy for the war-shattered nation as swiftly as possible since it provides the lion's share of state revenues.

The extent of damage to oil and gas infrastructure is still not clear but there was heavy fighting around the key oil centers of Brega and Ras Lanouf on the Mediterranean coastline.

Some industry analysts estimate limited production could resume within a few weeks.

But it could take at least three years to get oil production back to the pre-conflict level of around 1.6 million barrels per day, or 2 percent of global output.

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