The OPEC state can focus on reviving its oil production without security and logistical concerns but political challenges remain
The death of ousted Libyan leader Muammar Gaddafi in late October may have little direct impact on the oil industry, but his passing signifies a further step in the recovery of the OPEC nation.
Observers have said the killing of Gaddafi reduces the chance that violence will re-emerge as Libya cranks up production again. In addition, as Libyan crude returns to the market, it could rebalance the price of oil on the international markets as global confidence in the country returns.
“The news of Gaddafi’s death will certainly send a collective signal that the next phase in Libya’s national recovery can now begin,” Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, wrote in a statement.
“But in terms of physical oil production there is not much that can be done in the short term that is not already being done,” he added. “The writing had been on the wall for some time in this conflict, and Libyan oil production had already started to recover from the near total disruption that occurred at the height of the civil war.”
Before the recent revolution, Libya produced about 1.6 million bpd, 85 per cent of which was exported to Europe. However, it is still likely to be many more months, or even years, before Libya can export as much oil as it did before war descended in February.
The spoils of war
Concerns about security and limited transport links have hampered efforts to inspect damaged oil fields and begin making repairs. Oil terminals have been damaged and reports have emerged of looters stealing expensive and crucial oilfield machinery, including power generators, pumps and trucks.
However, such isolated incidents are more than balanced against the benefits brought by Gaddafi’s removal.
“This will improve transport to fields and we can now concentrate on rebuilding the sector,” the chairman of the National Oil Company, Nouri Berouin, told Reuters.
Though estimates of Libya’s re-emerging production are spurious at best, the oil chief said daily output had risen to 430,000 bpd after two more eastern oil fields operated by Benghazi-based Agoco had successfully been restarted following delays from mid-October.
Many oil fields, including the giant Elephant and El-Sharara fields operated by Eni and Repsol, which account for around a quarter of the country's 1.6 million bpd output, have been largely abandoned due to security concerns.
About 130,000 bpd of refining capacity is back online, and this figure could more than double to 300,000 by the end of the year.
However, analysts are eyeing the mounting difficulties the interim government, the National Transitional Council, is facing within its ranks and rising power of the Islamists within the coalition.
"There is no parliament, no constitution, and virtually no civil society organisations, and the Libyan military is riddled with tribal and regional divisions. Hence, the potential for a security and political vacuum in Libya continues to be elevated, in our view," according to a statement from Barclays Capital analysts.
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