However recent developments have provoked warnings that mismanagement could force the industry into long-term decline.

Arabian Gulf Oil Co, the country’s largest producer with a near monopoly over the eastern oilfields, spent last week in a battle of wills with Tripoli’s transitional government.

Its management threatened to shut down crude production unless armed protesters who were blockading its Benghazi offices were persuaded to leave. The 50 gun-toting men at its gates have been barring employees from entering the facility for two weeks.

The company produces 375,000 barrels of crude a day of the 1.4m pumped nationwide. A stoppage would derail attempts to raise its output to 425,000 barrels a day in mid-May.

Libya has the largest oil reserves in Africa, according to BP estimates, making its the continent’s third-biggest producer. With four-fifths of government revenues generated by oil sales, the government can ill afford a setback on the one front where it can point to a return to normality. Tripoli’s traffic clogged streets present a visible indicator of the country’s rapid return to normality after the overthrow of Col Gaddafi.

In its final throes the cash-strapped regime was unable to provide petrol to the pumps, rendering the roads and highways of the capital deserted.

The activity compensates for failures elsewhere – few government departments are functioning normally and militias have not been disarmed or disbanded.

“If this is not dealt with, then the consequences would be grave. It is unbelievable that a company as big as AGOCO remain hostage to a group of people,” said Abdul Jalil Mayuf, a spokesman. “The government should either deal with them by force or find a solution.”

Foreign experts on Libya’s oil industry believe only a minority of expatriate personnel have returned to the country, mostly to staff headquarters in relatively safe Tripoli. Most cite security concerns for not returning personnel to the oilfields. The logistics of even visiting the desert camps in the Sirte or Murzug basins involves negotiations with multiple militia commanders to secure safe passage.

Until a national government is installed most companies are likely to defer large scale deployments for new projects.

“I don’t think we’ll see much momentum until the election fallout is known,” said Henry Smith, a regional analyst at Control-Risks, the business risk consultants. “Security issues are still pronounced and the fragility of the current situation is significant. A lot of what we see is maintaining the existing infrastructure but no plans to expand until there is more clarity.”

With former revolutionaries demanding jobs in the country’s main industry, a scheme to absorb fighters into an oilfield’s protection force is exposing damaging turf wars.

“We have been promised jobs as part of the protection force but so far the government has not approved the contracts,” said Abdulhameed Aboragega, a member of the Zintan Miltia, one of the most prominent bands of anti-Gaddafi fighters. “There is a lot of resentment among our brigade members who thought they were going to be rewarded with jobs.”

A Repsol joint venture was last month stormed by fighters seeking payment for six months work guarding its premises during the uprising.

A report from Barclay’s warned that output was poised to stagnate as the scope for “temporary fixes” is exhausted.

Feedback from the first oil industry investment conference held in Tripoli since the war last week was “mixed” with participants reporting that officials could not provide assurances for new investors.

The arrival of the coffin containing the body of Shukri Ghanem, Gaddafi’s former oil minister, at Tripoli airport on Thursday underlined the potential for the ghosts of regime to stalk the industry.

An audit leaked to Global Witness, the anti-corruption campaigners, found “murky” practices including discounting and sweetheart deals had cost the taxpayer millions.

“Murky dealings within Libya’s National Oil Company, and the systematic mismanagement of the country’s oil wealth have effectively denied millions of dollars to the people of Libya,” said Giulio Carini, a campaigner at Global Witness. “The case for reform of the country’s oil sector could not be stronger or more urgent.”

Mr Ghanem, who was Libya’s Opec delegate, oil minister and prime minister, was the oil industry’s most powerful figure for decades under Gaddafi. He was found floating face down in the Danube but police have found no suggestion of foul-play.

The unexplained death of such a powerful figure gives already an unsettled sector reason to hold back while Libya’s new rulers grapple with its prized asset.

Source: www.telegraph.co.uk

It is safe to say that the new Libya will not have a drastically different upstream oil and gas policy than the one pursued by the Gathafi regime. Most likely, under the new Libyan system of governance, oil and gas rights will continue to be granted through production sharing agreements. There will also be new opportunities for those companies interested in service contracts for existing oil and gas production, mainly in the area of enhanced oil recovery.

However, the international oil and gas industry will most likely notice a substantial difference in the level of transparency and openness when dealing with the various government entities, such as the National Oil Company (NOC) or the Ministry of Energy.

During the time of the Gathafi regime, the Gathafi family ran Libya, and especially the state’s oil and gas apparatus, like it was its own personal property. This included terrorizing mid-level and senior NOC management into submission to the whims and desires of the Gathafi family. Business, economic or commercial considerations hardly played a role in the Gathafi decision-making process. Everything was decided on a political basis, mostly for expanding Gathafi’s control. As such, most of these mid-level and senior NOC managers were unable to interact with the foreign oil and gas companies in a reasonable and transparent manner, for fear of reprisal from Gathafi’s enforcers. Of course, the relationship with the international oil and gas companies suffered tremendously from this un-natural dynamic. It was very frustrating for many foreign oil and gas company managers to deal with these scared and corrupt bureaucrats. In many cases, it was outright impossible to conduct normal, everyday business in Gathafi’s Libya.

Many of those who make up the leadership of the new Libya were intimidated into making many wrong decisions to satisfy the Gathafi family agenda. They had seen firsthand the consequences of running the oil and gas business as the personal property of the Gathafi family. It is reasonable to assume that the new leadership will function much more transparently, especially when it comes to Libya’s major source of income – oil and gas.

It is important to understand the ideals of the Libyan revolution, when considering the future of the oil and gas business in Libya. One of the main goals of the anti-Gathafi revolution was, and still is, to strive to rectify all the damage that the Gathafi regime created, which includes the mismanagement of the oil and gas wealth and the related organizations.

Moreover, when trying to predict the future of the foreign oil and gas community in Libya, we must also bear in mind the education and experience level of management of the NOC and other related governmental entities. Many of these professionals studied in the US and Europe. Many were also employees of international oil and gas companies, making them fairly aware of the needs and limitations of the international oil and gas community. Given the nature of the new order in Libya, it should not come as a surprise that these professionals will be much more transparent and accommodating. They are no longer functioning under the tyranny of one man and his family.

Most of the new Libyan leadership is made up of people who have a friendly disposition toward the West, and foreign investment in general. They are very thankful to the West for helping bring about the demise of the Gathafi regime.

On the other hand, although the Gathafi regime appeared to be friendly during its last several years in power, it was actually quite suspicious of the West, and foreign investment. It knew that it had to make fundamental reforms to attract and keep desperately-needed foreign investment, which meant giving up some control. This was not something desirable for a regime that believed it could maintain power only by ruling with an iron fist.

In addition to the abovementioned post-Gathafi oil and gas business improvements, Libya has for a long time offered very competitive production sharing agreements, and more than adequate oil and gas infrastructure for expediently monetizing any oil or gas discoveries.

In the event of a natural gas discovery, Libya offers a more than adequate domestic natural gas market that is steadily growing, with excess natural gas pipeline capacity. It also offers natural gas export opportunities, as Libya enjoys the benefits of an LNG production plant and export terminal, as well as an export natural gas pipeline to Italy. The current Libyan energy authority is more open to accommodating the oil and gas companies with favorable natural gas sales/purchase agreements. Libya enjoys a very positive cash flow, and can afford to fully pay its natural gas suppliers in a timely manner.

The existence of world class oil and gas infrastructure offers the oil and gas investor in Libya a more cost-effective environment. Currently, and in the foreseeable future, there would be no need for any major infrastructure investment on the part of the foreign oil and gas companies. Most hydrocarbon-rich areas of the world, outside the industrialized world, do not even come close to offering this kind of oil and gas investment environment.

Although it is true that some of the infrastructure was damaged during the civil war, it does not amount to more than 10% of the entire oil and gas infrastructure. Furthermore, Libya has the ability to quickly make the necessary repairs to function normally. In fact, Libya’s crude oil production has now reached 600,000 b/d from less than 100,000 b/d, during the height of the civil war in the summer of 2011. The country plans to increase its crude oil production to around 1.7 million b/d before the end of 2012, which is the pre-civil war level of production.

Some have warned that Libya still faces the serious challenge of political (and sometimes tribal) fragmentation to be considered a truly viable investment climate. Those who make such statements do not truly know Libya and Libyans. There are many “experts” who have no knowledge of Libya’s history, culture, and the tribal/clan and family dynamics. Therefore, it is not difficult to arrive at the wrong conclusions.

In Libya, the only people who could have caused the country’s disintegration were the Gathafis and their supporters. Their ability to cause major strife between the different political or tribal factions has been entirely eliminated, and they are no longer a threat to the new Libya.

Once in a while, we hear news about clashes between different factions that appear as tribal rivalries. However, they are clashes that almost always stem from some residual effects of Gathafi’s 42-year rule. These residual effects will not disappear overnight, but they are not a threat to the general well-being and stability of the new Libya.

With the total defeat of the Gathafis and their supporters, Libya is no more a fragmented society than any stable country with different political factions competing for power, like in many Western democracies. This political reality will have no major effect on the oil and gas investment climate, much like it has no major effect on the operations in the North Sea or the Alaskan North Slope.

Let us not forget that the foreign oil and gas community has been operating reasonably well in Algeria, which is a country that has been plagued by a civil war and political violence since 1992. Libya’s political challenges are not even close to being as acute as Algeria’s.

Therefore, if there is no significant interference from foreign powers, like in Iraq or Afghanistan, there is good reason to believe that the new Libya will be one of the better places to do business for the international oil and gas industry, perhaps even better than the North Sea and the Alaskan North Slope, or even the Gulf of Mexico.

Source: www.middle-east-online.com

Stephen Green said that a number of British businessmen took part in his meetings with Libya’s new leaders and established businessmen to begin discussing future deals and contracts.

He said that he did not expect Libya to give the U.K. better bidding options or business advantages.

“They (Libyans) are appreciative of the role the UK played, but do we have better options? No,” Green said.

Energy giants Shell and British Petroleum, as well as oil and gas consultancy firm AMEC were among the businesses that accompanied the trade minister for talks in Libya.

Libya’s economic future could hinge on the performance of its lucrative oil and gas sectors, of which production was ground to a near standstill during the past six months of civil war.

Libya sits atop Africa’s largest proven reserves of conventional crude, raking in $40 billion in revenue last year from oil and gas exports. Still, experts say it could take more than a year to get Libya back to its prewar production rate of 1.6 million barrels per day.

Green said that while it’s not too early to talk business in Libya, no contracts will be signed until an elected government is in place.

“No strategic decisions will be made until there is a proper constitution and a legal government,” Green said.

Source: www.washingtonpost.com

Abdeljalil Mohamed Mayuf said that the Arab Gulf Oil Co., responsible for more than a quarter of Libya’s former production of 1.6 million barrels a day, stopped pumping for fear of further attacks by the forces of embattled leader Moammar Gadhafi.

“Everything depends on security. We can produce tomorrow but our fields would be attacked,” Mayuf said in an interview. “We cannot put an army around each field. We are not a military company and the forces of Gadhafi are everywhere.”

He said they were within 40 kilometres of the southeast fields at Messla and Sarir.

“We cannot say when we will restart because it depends on this military operation and when Gadhafi leaves.”

He said the decision was made after rocket attacks April 4 seriously damaged a pumping station and production facilities at southeast Messla oilfield, followed, a few days later, by hits on a pumping station halfway along the 317-mile (510-kilometre) pipeline from Messla to Tobruk port. Eight rebels serving as guards were killed in the second attack, he said.

Gadhafi struck after the rebels had just begun exporting oil, following a weekslong hiatus due to fighting. The rebels had sold 1 million barrels of oil with the help of Qatar. The exports were intended to raise funds to battle the leader of 42 years, who still controls the western half of the country.

After the attacks, rebel oil chief Wahid Bugaighis said repairs to Messla would be completed in about three weeks and they would resume pumping oil.

Mayuf said Bugaighis “doesn’t know what he is talking about.”

Bugaighis told the AP on Saturday that he no longer has authority in the rebels’ civilian National Transitional Council. His resignation apparently followed differences with Agoco. The council announced an expanded temporary Cabinet on Friday but did not name a replacement for Bugaighis.

Though it is outside his portfolio, Mayuf castigated countries that rebel officials consider to be supporting Gadhafi, in part because of votes on Libya in the Security Council. “Countries like Russia, China, India, and Brazil also has a strange position, these people should be concerned about their interests in Libya, concerned about what will happen when all Libya is free of Gadhafi,” Mayuf said. China Oil, Oil India, Russia’s Gazprom and Brazil’s Petrobas all have investments in Libya.

Some 80 per cent of Libya’s oil fields and facilities are in the east of the country that has come under rebel control in the three months since citizens of the northeast port of Benghazi started the revolt against Gadhafi.

Mayuf said most oilfields in west Libya were run by Western companies who evacuated from Libya weeks ago, with production at the main western Hamada fields halting from the start of the revolt. He said the western refinery at Ras Lanouf operated with Agoco oil, so could not be productive until Agoco resumes work. Agoco provided about 15 per cent of fuel for a smaller refinery at Zawiya, just east of Tripoli, he said.

Agoco, which is the biggest company operating in Libya in terms of production and the size of reserves in its oil fields, has retained skeletal staffs at all its facilities but only for maintenance of equipment, Mayuf said.

The company produced 425,000 barrels a day before the uprising, and afterward dropped to 130,000 a day.

Mayuf said Libyan oil executives long have been suspicious of the official production figure of 1.6 million barrels daily put out by Gadhafi’s regime. “They’ve been using that figure for the past three years, but we know production has gone up and many of us suspect it was nearer 2 million (barrels) a day,” he said.

He speculated the extra 300,000 to 400,000 barrels of Libyan sweet was sold on the spot market to benefit Gadhafi and a small elite clique. There was no way to verify Mayuf’s speculation.

Libya produces only a fraction of world production, with most exported to Europe, but fears of similar uprisings spreading to other oil-producing Arab nations has caused world oil prices to soar.

Libya has the largest proven oil reserves in Africa, an estimated 46.4 billion barrels as of January 2011, according to Oil and Gas Journal.

Amid gas shortages and long queues, the rebel National Transitional Council issued a statement Saturday urging citizens to conserve gas, to ensure fuel supplies in all of liberated Libya, especially the besieged port of Misrata, where rockets set the main fuel supply depot ablaze last week.

Source: www.google.com

En Trípoli, Sócrates se reunirá con el líder libio Muammar Gaddafi y con el secretario general del Comité Popular General al Baghdadi al-Mahmudi. Se espera que durante las pláticas se exploren distintos medios para equilibrar el balance comercial entre ambos lados, el cual está a favor de Libia, uno de los principales abastecedores de petróleo de Portugal, por 296,8 millones de euros.

El ministro de Economía portugués José Vieira da Silva dijo que las reuniones de Sócrates se enfocarán en promover las relaciones dentro de las industrias de energía, infraestructura, agricultura y alimentos.

Da Silva, quien acompaña al primer ministro portugués, dijo que la gira pretende ampliar las relaciones comerciales existentes con Argelia y Túnez, promover las relaciones de vecindad con Marruecos y traer más compañías portuguesas a Libia.

El lunes Sócrates partirá hacia Argelia donde se reunirá con el presidente Abdelaziz Bouteflika y participará en un seminario sobre energía renovable.

La corporación estatal argelina de petróleo y gas, Sonatrach, y la principal compañía portuguesa de petróleo y gas natural, Galp Energia, tienen un acuerdo bajo el cual el 61 por ciento del gas natural de Galp proviene de Sonatrach a través de tuberías que transportan el gas natural. Argelia también es uno de los principales abastecedores de petróleo de Portugal.(Xinhua)