| Kippreport.com

Libya rebuilds oil sector as foreign workers wait

September 24, 2011 5:20 by Reuters

…Gaddafi troops who used them to shuttle arms back and forth to Misrata when it was under siege.

Accommodation is hard to find. Some of the houses in the workers’ barracks are little more than sunken husks and there is no electricity or running water. An upturned armchair with loose stuffing is parked in the middle of the street. The forest-green uniform of a Gaddafi soldier lies on the pavement, apparently abandoned by its owner.

Still, spirits are high in the oil-rich east, one of the spearheads in the military campaign against Gaddafi. For people here, restarting oil output is a matter of pride.

In Benghazi, Yousef Mahmoud, an engineer at National Oil Company subsidiary Jowfe, has set up a society called the February 17 oil group, named to commemorate the day Libya’s revolt began. It has 4,000 members from Libyan oil firms. As well as restarting output, it wants to purge former Gaddafi sympathisers from the business and move the country’s umbrella oil firm NOC away from Tripoli and into the east.

“We are trying to push people to work again and we try to make a full report of the damage,” he told Reuters, sitting in the Benghazi office of US oil services company Baker Hughes.

There was not an American to be seen in the office. Foreign oil firms have yet to return to Libya on a large scale. Economic sanctions have deterred many US firms, even though the United Nations Security Council voted last week to ease them. Security is the main concern.

International oil firms are accustomed to working in hostile environments, but as a general rule they rely on their own security firms. This grates with Libyans, who feel they are capable of securing the country after ousting Gaddafi. That’s turning into a sticking point in negotiations.

“If security is good enough for Libyans it should be good enough for foreign workers,” said interim oil minister Ali Tarhouni. An oil official in the NTC told Reuters the country is planning to create a force of 5,000 security guards to secure oil and gas infrastructure.

RISK OF ATTACK
Libya’s oil industry can restart without foreign firms, but analysts say a speedy return to pre-war output of 1.6 million barrels per day (bpd) will depend on their return.

In the short term, the priority for oil production is to serve the Libyan people, says Abdalil Salah, an official in the oil ministry. Imports are costing Libya’s interim administration around $330 million a month. Blackouts and fuel shortages at service stations are still common.

Abdusalam el-Madani, head of administration for German oil company Wintershall in Libya, has visited his company’s oil sites which have not been mined or suffered major damage. “The facilities are ready to start operating and our foreign workers will be back by early October,” he said.

Official estimates of how quickly Libya’s oil output can recover range from a year to 15 months. That may seem slow, but Iraq’s oil output has yet to return to its late-1970s and early-1980s levels eight years after the fall of Saddam.

In messages broadcast from hiding, Gaddafi has threatened devastation similar to Saddam’s in Iraq. Until he is caught or killed, that remains a risk, particularly in remote desert areas like the Sirte Basin. In theory the area is under NTC control. But soldiers from Gaddafi’s desert strongholds could easily move eastwards.

Despite their concerns, Libya’s oil companies take solace in the preparations they made ahead of the crisis. Libya’s crude in the Sarir field is particularly waxy, and when in the late 1970s British oil major BP was forced out by nationalisation, the company told the Libyans it would leave behind clogged pipelines.

“They said they would leave us with the world’s largest candlestick,” said Younis Feituri, a member of Agoco’s management committee for exploration and production. This time around, the company mixed the crude with a thinner variety of oil and it is now flowing to the Tobruk export terminal. “We haven’t forgotten BP’s words.” (By Emma Farge)

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Tags: Benghazi, Brega, Gaddafi, Libya, Libya NATO, libya oil, National Oil Company, NATO, noc, oil terminal