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Ron Paul: There Could Be Angry Mobs in U.S. Streets Like in Europe

Fri Aug 26, 2011 11:22am EST 4

Oil companies vie for Libya; existing infrastructure intact

Fri Aug 26, 2011 11:20am EST Comments Off on Oil companies vie for Libya; existing infrastructure intact

Prepare for several hundred thousand barrels a day flowing out of Libya, in a matter of weeks (read a few months, in realistic expectations).

Do not tell me the market has priced this in; everyone was thinking Libya would be a ten year bloody war with zero output from the country only a matter of weeks ago. If oil actually flows from Libya’s ports, crude prices go down. Saudi output offsets are irrelevant, as everyone will be calmer about net production capabilities.

(CNN) — International oil companies are jockeying for advantage in the new Libya, buoyed by news that damage to the energy infrastructure appears to be slight. But they remain anxious about a lack of security and are holding off sending workers back into the country.

National Transitional Council officials report little damage to oil export terminals in eastern Libya (at Ras Lanuf and El Brega) and have appealed to employees to return to work. The two terminals handle the bulk of oil exports pumped from the Sirte basin. But the rebels have also begun to use, with help from Qatar, a terminal at Tobruk.

The NTC official in charge of oil and the economy, Ali Tarhouni, told Reuters news agency Thursday that he expects production can reach 500,000 to 600,000 barrels per day within a few weeks, and return to the prewar level of 1.6 million within a year.

Some industry analysts believe that is optimistic. Sources at Italian oil company Eni (the largest producer in Libya) forecast production at 750,000 barrels by sometime early next year. Energy consultants Wood Mackenzie estimate it will take three years for production to recover to the prewar level. But that would depend on the prompt return of foreign workers.

In a recent report, Wood Mackenzie estimated “six months will be required for NOC (Libya’s state-owned oil firm) staff, international companies and foreign workers to return and re-establish supply lines and assess and repair damaged infrastructure.”

Libya has always relied on foreign expertise to exploit its oil, but expatriate workers may be reluctant to return before the violence — and the threat of abduction — abates. The waters off Tripoli, where heavy gunbattles continued Thursday, contain important fields like the Bahr Essalam. But in the east, too, there are still pockets of fighters loyal to deposed leader Moammar Gadhafi and there are ongoing clashes.

Spanish oil company Repsol said last month that its assets in Libya were intact, but said staff would only return to the country when fighting ceased and it would take at least four weeks to resume production. Marathon Oil, based in Houston, said it has had preliminary talks with the National Transitional Council about restoring production when the situation stabilizes.

The worst scenario for the NTC — and the oil companies — is a prolonged campaign of sabotage by opponents of Libya’s new rulers. Wood McKenzie noted that Gadhafi supporters sabotaged the pumping station that moved oil from the Sarir and Messia fields early in the conflict and said: “Libya’s oil fields are located in the vast, remote Saharan desert, making them impossible to defend from attack.” Other analysts point out that only now, after a prolonged insurgency, is Iraq’s oil output recovering to pre-invasion levels.

My favorite part is at the end of the section I highlighted, where some guy suggests that the oil fields being located in a desert makes them impossible to defend.

Sure it does…

More like, it makes it easier for NATO to carpet bomb anything that gets close to them. You’re nuts if you think the U.S. isn’t watching those fields intently. We’re not going to let some useless Libyan ex-regimists pull another Kuwait.

Can you say “dead zone”?