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Oil production in Libya resumes

Tuesday, September 27, 2011

ROME -- Italian and French energy companies have resumed partial oil production in Libya after months of civil war.

Officials of Libya's transitional government are still awaiting U.N. action to unfreeze billions of dollars in assets. They say the funds unfrozen so far aren't enough to significantly rebuild Libya's health, education and other institutions after 42 years of languishing under Moammar Gadhafi's regime.

Italian energy giant Eni said Monday it has resumed oil production in Libya after months of interruption due to the civil war that toppled Moammar Gadhafi's rule. By Monday, 15 wells had been tapped, producing some 31,900 barrels of oil per day.

The French energy company Total said it has restarted some production last week.

It was not clear how long it would take Libya to return to its prewar production of 1.6 million barrels a day.

But even the limited resumption of oil production is an important psychological sign of foreign energy companies' faith in Libya's future. Libya sits atop Africa's largest proven reserves of crude, and with a population of only 6 million, raked in $40 billion last year from oil and gas exports.

"That's good news," said London-based analyst, Samuel Ciszuk of IHS Global Insight. But he cautioned that "we're still talking about very small volumes."

Ciszuk stressed in a telephone interview with The Associated Press that many unknowns loom as Libya tries to resume full production.

"Many of the large fields were shut down in panic as people were leaving" to flee fighting, he said. "They might be damaged, they might not be damaged. It might be complicated."

Many locations also still await inspection, including the Sirte Basin, a stronghold of Gadhafi supporters.

"That's where most of the production comes from, and it's still been too early to get an assessment," he said.

Eni's revived production operations have focused on 15 wells at the Abu-Attifel field some 185 miles (300 kilometers) south of the eastern city of Benghazi, and are being conducted by Mellitah Oil & Gas, a partnership between Eni and Libya's state-run National Oil Corp.

Eni said other wells will be reactivated "in the coming days" to reach the "required volumes to fill the pipeline" between the Abu-Attifel field and the Zuetina port on the Mediterranean. The Abu-Attifel field was the first "giant" oil field discovered by Eni in the 1960s.

Ciszuk said those areas close to Benghazi didn't see much fighting and were "expected to come back on quickly."

The Libyans say they have enough cash in their country to cover expenses such as public sector salaries for a few months, but much more is needed if nation-building is to get going quickly.

Eni said it couldn't estimate how much an impact its first resumption of production might have on the Libyan economy.

Officials of the transitional government have taken pains to assure the West that energy contracts from the Gadhafi era will be honored.

French company Total said Monday that it resumed production on Sept. 23 in partnership with Libya's state-run oil company and a German company at an offshore field well called Al Jurf. Production is slowly ramping up and will eventually be 40,000 barrels a day, according to Florent Segura, a Total spokesman.

Spain's Repsol YPF said Monday it hasn't restarted production yet at the fields it operated in Libya and doesn't know when it can resume. No Repsol employees have been sent in yet but the company is using Libyans and contractors to assess its infrastructure in Libya.

"Repsol continues to closely monitor events in Libya," said company spokesman Kristian Rix.

Ciszuk noted that Repsol's oil interests include Gadhafi loyalist strongholds such as the southern desert city of Sabha.

Eni has been active in Libya, Italy's former colonial ruler, since 1959 and is the largest foreign player there in terms of hydrocarbon production. Before full-scale civil war erupted in February, Eni was producing 273,000 barrels of oil equivalent per day in Libya.

Natural gas is another mainstay of Libya's economy. Eni chairman Paolo Scaroni has set what he calls an ambitious target date of mid-October for getting the gas flowing again to Italy again through the Greenstream pipeline.


Nicole Winfield contributed from Rome, Sarah Di Lorenzo contributed from Paris and Tarek El-Tablawy contributed from New York.


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