The future of Libya’s oil taking shape as first tanker arrives in rebel port
Eric Watkins, Oil & Gas Journal, April 5, 2011
The MT Equator, a Suezmax tanker chartered by Geneva-based oil trader Vitol SA, arrived in the rebel-held port of Marsa el-Hariga in eastern Libya, aiming to take on up to 1 million bbl of oil for export.
“The significance is not only that this is the first shipment in 18 days, but also a signal that Libya is open to international trade and shipping,” said Michelle Wiese Bockmann, markets editor of Lloyd’s List shipping newspaper.
More to the point, a delivery from Marsa el-Hariga would bring in significant funds for forces opposed to the rule of Libyan leader Moammar Gadhafi even as government forces today continued to attack rebels trying to reassert their control of the key oil town of Brega.
The battle over Brega is largely connected with the town’s 8,000-b/d refinery and its Mediterranean oil export terminal—both facilities that could significantly boost the rebels’ chances of increased revenue in their fight against Gadhafi’s better trained and equipped military forces.
The planned shipment aboard the MT Equator would represent just a fraction of Libya’s precrisis exports of 1.6 million b/d, but analyst Samuel Ciszuk of IHS Global Insight said the exports would make rebel operations and long-term existence “much more viable.”
In a note to clients, however, Ciszuk also warned about the likelihood of fighting spreading to the eastern oil areas.
“Given the impact on the rebel movement that the establishment of its own independent revenue stream would have, it is not surprising that the fighting could be draw into the rebel-controlled eastern oil areas,” Ciszuk said.
The rebels would likely “struggle to successfully repel well-organized raids to damage production and transport infrastructure at the oilfields,” Ciszuk said.
Ciszuk’s remarks followed a visit to Benghazi, eastern Libya, by Eni SPA Chief Executive Officer Paolo Scaroni on Apr. 2, according to a statement by Italy’s Foreign Minister Franco Frattini.
According to Frattini, Scaroni “had contacts with the Libyan National Transitional Council to restart cooperation in the energy sector and get going again the collaboration with Italy in the oil sector.”
Before Libya’s violent upheaval largely shut down or drastically reduced oil and gas production, Eni was the biggest gas exporter from Libya, as well as its largest oil producer. Its operations are largely in the rebel-held areas of eastern Libya.
Meanwhile, Abdul Ilah al-Khatib, the United Nations’ special envoy to Libya, following earlier meetings with opposition leaders, told the UN Security Council that the rebels have “raised concerns about the lack of funds, as well as issues relating to the marketing and sale of oil and gas in Libya.”
Al-Khatib told the council that said loan guarantees on oil and gas and funds from overseas assets were crucial to sustain the rebel’s economic stability.
The European Union offered its assurances over the potential sale of oil by the rebels, saying that its embargo on Libyan oil and gas exports only targets the Gadhafi regime.
The 27-nation bloc has “no issue” with commercial dealings in Libyan gas and oil as long as the revenue doesn’t reach Gadhafi or his supporters, according to Michael Mann, spokesman for EU foreign policy chief Catherine Ashton.
Exactly who will buy the oil or even its destination are uncertain as a spokesman for Vitol declined to comment on the company’s involvement in the shipment aboard the MT Equator, citing commercial sensitivity.
According to Bockmann, the shipment would be taken to Qatar for marketing possibly to Italy and France. But Vitol could also have the cargo delivered to Antwerp or Fujairah, where it owns facilities with around 147,000 b/d of refining capacity.
The rebel-controlled Arabian Gulf Oil Co. (AGOC) said it has 3 million bbl of crude stored at Marsa el-Hariga and that opposition-controlled fields in the eastern part of the Sirte basin—connected to the port via pipeline—are producing at a rate of 100,000-120,000 b/d.
But Ciszuk dismissed as “very over-optimistic” reports from AGOC that production from the Sirte basin could quickly be increased via the recruitment of Arab oil engineers, mainly Egyptians, to make up for a shortage of Libyans.
Meanwhile, a Libyan-owned vessel carrying a cargo of imported gasoline is reported to have docked at a government-controlled port, helping to relieve a fuel shortage.
A Libyan government official and an energy industry executive said the ship is owned by the Libyan state shipping company and was unloading a cargo of 23 million l. of fuel at the port of Zawiyah, 50 km west of Tripoli.
It was not clear where the vessel had come from or how it was able to penetrate the cordon of North Atlantic Treaty Organization warships now patrolling Libya’s coast to help enforce international sanctions.
The Libyan energy industry executive said the arrival of the vessel was a good step in easing the shortages in government-controlled areas of the country, but that future supplies remained uncertain.
“We do not know if there is a plan to bring more fuel, or if it is only this ship,” he said.