Undoubtedly, it was a joyous moment when the Libyan rebels jubilantly celebrated their victory over Muammar Al-Qaddafi after finally seizing control of Al-Azizia compound in Tripoli, ending a horrid civil war that lasted over six months and a despotic regime that persisted over four decades. The future of Libya now seems promising, resting in the hands of its National Transitional Council (NTC), which acted as the political ‘face’ of the revolution, and currently serves as Libya’s interim government.

Libya’s economy is largely based on its oil exports, contributing between 75% and 90% of total revenue. It is known for its copious oil resources, sitting on the largest proved oil reserves in Africa. Based on the British Petroleum’s 2011 Statistical Energy Survey, Libya’s proven reserves counted for 46.4 billion barrels at the end of 2010, which constitute 3.4 % of the world’s oil reserves. Being a member of the Organization of the Oil Exporting Companies (OPEC), Libya is one of the major North-African oil suppliers to Europe as it enjoys a proximate strategic location and an abundance of oil resources.

Yet, during most of Al-Qaddafi’s rule, Libya underwent a series of sanctions and embargos that impeded the development and growth of its oil industry. Al-Qaddafi’s socialist-like nationalization programs in 1970s were heavily criticized by the west. He founded the National Oil Corporation (NOC), which was legally bound to Production Sharing Agreements (PSAs) with International Oil companies (IOCs).  Moreover, the growing ties between AL-Qaddafi and the Soviet Union during the Cold War made the Western position even more stubborn. In 1992, the UN imposed further sanctions on Libya after it was accused of bombing Pan Am flight 103 over Scotland, leading to Libya’s political and economic isolation for most of 1990s.

It was not until 2003 that the UN began to gradually lift its sanctions off Libya, only after Al-Qaddafi complied to abolish his Weapons of Mass Destruction project. Progressively, foreign investment started pouring into Libya and every major oil producer raced for a piece of Libya’s virgin resources. Leading companies such as ENI, OMV, Hess, Marathon, Occidental and Suncor started large-scale operations in Libya. Other producers such as Statoil, Total, Wintershall, Gazprom, Shell, RWE Dea and Woodside Petroleum also had their share, however on a smaller scale. For a brief period of time, Libya seemed to enjoy a healthy and steadily growing oil industry.

At the dawn of 2011, Libya was one of the earliest countries to revolt, an uprising that resulted in a brutal civil war forcing foreign companies to suspend all operations in Libya. From the earliest days of the revolution, the NTC was created to politically represent the interest of the revolution; a shadow-government that proclaimed itself the “only legitimate body representing the people of Libya and the Libyan state.” During the civil war, the NTC strategically organized the rebel forces against Al-Qaddafi’s army and quickly established a relationship with the West, calling for the recognition of its legitimacy by the International Community. The NTC was firstly recognized by France and gradually allied itself with NATO, which aided the rebel forces, both militarily and diplomatically, until their victory over Al-Qaddafi last month. Currently, the NTC enjoys the support of the international community and is recognized by 85 member countries of the UN as the legitimate representative of the Libyan people.

Sparing no time, significant efforts were initiated by the NTC to rebuild Libya’s severely damaged oil industry. The competition among countries for post-Qaddafi contracts in Libya is expected to be heavily influenced by the level of support the NTC received from foreign countries during the revolution.

At the top of the list of the likely winners are the Geneva-based Trafigura, the Dutch-Swiss Vitol and the Cypress-based Gunvor since they supplied the Libyan rebels with the much-needed fuel during the war. Also companies such as ENI of Italy, Austria’s OMV, Spain’s Repsol, British Petroleum (BP), France’s Total, Germany’s Wintershall and Occidental Petroleum, ConocoPhillips, Amerada, Hess and Marathon of the United States are expected to have their share in the future Libyan petroleum industry.

Recently, Gazprom Chairman Alexey Miller and ENI CEO Paolo Scaroni signed an agreement last month to reaffirm the agreements signed last February that would grant Gazprom a 50% share of Eni’s working interest in the Libyan Elephant oil field project. The Italian company is expected to handover half of its 33% stake to the Russian firm. In fact, the two companies have been in strategic partnership deals since 2006. This recent agreement reflects the eagerness of major companies to strength their operations in the Libyan territories.

Conversely, countries that refused to recognize the legitimacy of the NTC during the revolution, like Brazil and Russia, even more the ones who supported Al-Qaddafi like China and Algeria are expected to have a difficult time obtaining contracts in Libya. Despite China’s vast investment in Libya’s petroleum infrastructure, its prospects of returning on Libya’s good side are not so promising.  The NTC is determined to act with favoritism against those who supported or contributed to Al-Qaddafi’s side during their struggles.

Libyan experts in the petroleum field have expressed a great deal of optimism towards the future of the country’s oil industry. According to the NTC’s petroleum expert Ali Al-Tarhony, production rates are likely to rise during the coming weeks to reach 500-600 thousand barrels a day, and he expects Libya to reach its pre-revolution production rate of 1.6 million barrels a day within one year.

Wood McKenzie provides a more realistic assessment to the current status of the petroleum industry in Libya. The latest report estimates not less than three years before the country could get back to its pre-war production rates; depending on how quick it will take the NTC to restore the security and stability needed for foreign companies to operate.

Moreover, the report indicates that it will take at least six months for the NOC to readjust before foreign companies could be brought back in to start the rehabilitation of the Libya’s pipeline system and production infrastructure, which were severely damaged during the six-months war.

The future of the petroleum industry in Libya has never seemed more promising. Indeed, there are still challenges to face and obstacles to overcome, but the people of Libya have been unequivocal about their commitment to the rebuilding effort and for the first time. In the midst of the region’s vehement changing winds, and given what Libya has experienced during the previous six months, it is quite evident that the only trajectory Libyans are willing to settle for is upwards.

By: Mohamed ElBahrawi

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