Libyan oil flows, foreign workers wait

Fri Sep 23, 2011 11:55am BST

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BREGA, Libya, Sept 23 - Scribbled in blue marker in Arabic on the walls of Brega oil terminal of Brega is a message meant to cheer returning workers: "Gaddafi is gone and the place has been checked."

Oil production has restarted in some Libyan fields including Sarir in the east, but the near-deserted Sirte Oil headquarters to the east of Muammar Gaddafi's hometown is testament to the damage the conflict has done to the country's main industry.

Amidst a cluster of crude oil storage tanks, gleaming white in the Mediterranean sunshine, stand at least two charred grey ones. The chimney of the site's power plant lies in a gnarled wreck in the courtyard. A warehouse used for weapons storage, hit by a NATO bomb, is a tangle of wood and piping. A stash of missiles nestles in a petrochemical site, stored there by Gaddafi troops who took the gamble that NATO would not target expensive infrastructure.

Brega is one of a cluster of export terminals and Libyan oil companies are eager to get things started in a business worth about $176 million (113 million pounds) a day before the conflict. The country provides only around 2 percent of global oil consumption but its oil is prized for being easy to refine.

Some oil workers have marvelled that Gaddafi did not inflict damage to Libya's oil facilities on the scale of Saddam Hussein, who ordered hundreds of oil wells to be set ablaze on his retreat from Kuwait in 1991. There has been no comprehensive survey of the Sirte Basin, which holds most of the country's oil and gas fields, but interim oil minister Ali Tarhouni estimates the war has left 10-15 percent of Libya's oil infrastructure damaged.

Yet safety remains a major concern, especially after militia killed 17 guards at the nearby Ras Lanuf refinery last week. Brega is probably out of range of even the most sophisticated rockets in Gaddafi's arsenal. But the area is full of mines, and the country is strewn with ordnance dating back to World War Two.

LETHAL COMMUTE

Fathi Issa, chairman of the management committee of state-owned Sirte Oil, waves a small, disk-shaped anti-personnel landmine the colour of milky tea, and tells reporters that 6,000 of the explosives have been found on Brega beach.

"We will bring all the workers back when it's safe. We find something new every day," Issa told Reuters last week.

According to official figures from the National Transitional Council (NTC), 40,000 mines were planted around the Brega area during this year's fighting; Military spokesman Ahmed Bani told Reuters an order for 120,000 from Brazil was placed by a Gaddafi officer during the conflict, suggesting the number could be much higher.

Rabea, an engineer at Sirte Oil who only gave his first name, commutes daily along the Brega-Ajdabiya coastal road which is flanked on both sides by war graves. He has tried three times to re-establish his daily routine since the war began, most recently in late August. "I'm not afraid. The mines are mostly on the seaside," he said, his stoicism typical of many Libyans who have witnessed months of destruction.

IF IT'S GOOD ENOUGH FOR LIBYANS...

Foreign oil companies are less nonchalant.

"I know many think we are cynical people ready to do anything to earn some bucks, but we are not going to put our staff in harm's way. We need to make sure security is there," said a French oil industry source.

Sirte Oil's Issa says that besides mines, one problem has been sabotage to the Hateiba gasfields south of Brega. The tops of wells were found exposed, causing gas to leak out. Looting has forced many companies to order new equipment. Ras Lanuf Oil and Gas Company, or Rasco, told Reuters its tugboats were stolen by Gaddafi troops who used them to shuttle arms back and forth to Misrata when it was under siege.

Accommodation is hard to find. Some of the houses in the workers' barracks are little more than sunken husks and there is no electricity or running water. An upturned armchair with loose stuffing is parked in the middle of the street. The forest-green uniform of a Gaddafi soldier lies on the pavement, apparently abandoned by its owner.

Still, spirits are high in the oil-rich east, one of the spearheads in the military campaign against Gaddafi. For people here, restarting oil output is a matter of pride.

In Benghazi, Yousef Mahmoud, an engineer at National Oil Company subsidiary Jowfe, has set up a society called the February 17 oil group, named to commemorate the day Libya's revolt began. It has 4,000 members from Libyan oil firms. As well as restarting output, it wants to purge former Gaddafi sympathisers from the business and move the country's umbrella oil firm NOC away from Tripoli and into the east.

"We are trying to push people to work again and we try to make a full report of the damage," he told Reuters, sitting in the Benghazi office of U.S. oil services company Baker Hughes.

There was not an American to be seen in the office. Foreign oil firms have yet to return to Libya on a large scale. Economic sanctions have deterred many U.S. firms, even though the United Nations Security Council voted last week to ease them. Security is the main concern.

International oil firms are accustomed to working in hostile environments, but as a general rule they rely on their own security firms. This grates with Libyans, who feel they are capable of securing the country after ousting Gaddafi. That's turning into a sticking point in negotiations.

"If security is good enough for Libyans it should be good enough for foreign workers," said interim oil minister Ali Tarhouni. An oil official in the NTC told Reuters the country is planning to create a force of 5,000 security guards to secure oil and gas infrastructure.

RISK OF ATTACK

Libya's oil industry can restart without foreign firms, but analysts say a speedy return to pre-war output of 1.6 million barrels per day (bpd) will depend on their return.

In the short term, the priority for oil production is to serve the Libyan people, says Abdalil Salah, an official in the oil ministry. Imports are costing Libya's interim administration around $330 million a month. Blackouts and fuel shortages at service stations are still common.

Abdusalam el-Madani, head of administration for German oil company Wintershall in Libya, has visited his company's oil sites which have not been mined or suffered major damage. "The facilities are ready to start operating and our foreign workers will be back by early October," he said.

Official estimates of how quickly Libya's oil output can recover range from a year to 15 months. That may seem slow, but Iraq's oil output has yet to return to its late-1970s and early-1980s levels eight years after the fall of Saddam.

In messages broadcast from hiding, Gaddafi has threatened devastation similar to Saddam's in Iraq. Until he is caught or killed, that remains a risk, particularly in remote desert areas like the Sirte Basin. In theory the area is under NTC control. But soldiers from Gaddafi's desert strongholds could easily move eastwards.

Despite their concerns, Libya's oil companies take solace in the preparations they made ahead of the crisis. Libya's crude in the Sarir field is particularly waxy, and when in the late 1970s British oil major BP was forced out by nationalisation, the company told the Libyans it would leave behind clogged pipelines.

"They said they would leave us with the world's largest candlestick," said Younis Feituri, a member of Agoco's management committee for exploration and production. This time around, the company mixed the crude with a thinner variety of oil and it is now flowing to the Tobruk export terminal. "We haven't forgotten BP's words."

(Additional reporting by Marie Maitre in Paris; Edited by Sara Ledwith, Simon Robinson and Christopher Johnson)