Hopes for oil supply boost Libya majors

 
Elizabeth Fournier
SHARES in oil companies whose supply chains have been disrupted by the civil war in Libya rose yesterday, as investors bet on a swift return to production by some of Europe’s biggest players.

Despite a drop in the price of oil futures during trading, shares in Italy’s ENI, French major Total and Austria’s OMV rose by up to six per cent yesterday, though analysts said a return to pre-crisis levels of production could be slow.

Italian producer ENI, present in Libya since the 1950s, is the biggest foreign oil company there. Its contracts for oil production run until 2042, but it is not yet clear whether any future government would honour them.

Shares in ENI led the European oil and gas sector in early trading, hitting €13.66 before settling to close 6.17 per cent up at €13.66

The Italian foreign minister said contractors from ENI had already arrived to inspect facilities in the east of Libya, despite heavy fighting continuing between rebels and forces loyal to Gaddafi further west in Tripoli.

OMV also gained more than five per cent, despite saying it was not yet in talks with the country’s transitional council about continuing its contracts.

London-listed Shell, which was carrying out exploration work in Libya prior to the unrest, said yesterday it was too soon to consider returning. Its shares closed up 2.15 per cent.

FACTBOX: LIBYAN OIL OUTPUT DURING THE FIGHTING

● Until the beginning of this year, OPEC member Libya was the world’s 17th-largest oil producer and Africa’s third-largest. It sold about 85 per cent of its exports to Europe.
● Oil production was around 1.6m barrels per day (BPD), equivalent to about two per cent of global consumption, but fighting and social disruption have cut this to less than 100,000 bpd, and exports have stopped altogether.
● Many oilfields are dependent on foreign workers, almost all of whom have left the country.
● Most of Libya's oilfields are around the Sirte Basin, which contains around 80 per cent of its proven reserves and spans the front line between rebel and government forces. Many other key parts of the country's oil industry are still held by forces loyal to Gaddafi.
● Libya has six major oil export terminals, the largest of which at Es Sider produced close to 500,000 bpd before the civil war. The condition of these now is not clear
● Damage to infrastructure was reported to be light during the first few months of fighting as both sides hoped to take full control of the country’s oil industry.
● But damage has increased as fighting has continued and rebels have reported significant damage to oil infrastructure this month. It has not been possible to independently confirm reports of damage being done to oil installations, an accusation rebels have previously levelled at government forces.
● Libya’s oil industry was formerly run by the state National Oil Co, which accounted for around 50 per cent of the country's output.
● Since fighting began the Libyan National Council, with the help of Qatar, has been able to export a minimal amount of crude oil in the form of two partially laden tankers. The oil for these cargoes was reported to have been in storage. One of these cargoes went to a US refinery and the other to Italy. No exports have been reported for several weeks.
● It is not clear how the oil industry will be structured after the war, but it may be
placed in the hands of Libya’s Arabian Gulf Oil Company (AGOCO).
● A poll of analysts and industry officials last month forecast it would take up
to one year to restore Libyan output to at least 1m bpd but up to two years to get back to pre-civil war levels.
● Foreign oil firms, essential for the quick resumption of production, have spoken to rebels at length, but the future of contracts with the government is uncertain.