* Libya's top quality oil in high demand
* NOC says trading houses are a `necessary evil`
* Vitol seen as top contender for contracts
By Emma Farge
ISTANBUL, Nov 23 (Reuters) - Libya may award long term oil contracts to trading houses, departing from a custom of keeping those deals for oil firms and refiners as it looks to maximize revenues and reward traders' support of new leaders during the civil war.
Trading houses are meeting with top officials in Libya's National Oil Corporation (NOC) this week in Istanbul in a rare chance to gain access to the OPEC member's prized annual supply contracts, potentially leaving a smaller share for refiners.
Senior officials at the NOC negotiating table including marketing managers Ahmed Shawki and Muhssn Abdulhafid Almaswry told Reuters a final decision has not been made on the eligibility of trading houses for long-term contracts, but said they were welcome to compete.
"We will evaluate all requests. We can't just eliminate the traders. They are a necessary evil," said Shawki, general manager for oil marketing at NOC, adding that traditional end users would remain important clients.
Libya's powerful oil body the NOC traditionally only signed term contracts with end-users but its post-revolution leaders have invited trading houses such as owned Vitol, Trafigura and Gunvor to talks, stirring fear among rivals that the 2012 deals may be divided up in their favour.
Competition for term contracts is expected to be tough with around 50 companies due to meet the new faces of the NOC this week in the hopes of gaining access to Libya's light, sweet easy-to-refine oil . A decision on the 2012 allocations is expected within two weeks.
"Imagine you are a producer of caviar. Everyone wants some - it's just a matter of price. It's very attractive for companies like Vitol to have a range of different oil grades to sell, including sweet and sour," said an oil industry source in Istanbul.
With the exception of Nigeria, it is rare for OPEC members to sell directly to trading houses since these firms effectively compete with producers to sell onto refiners.
Before the uprising in February, the bulk of Libya's exports of around 1.3 million barrels per day went to Europe with about 32 percent going to Italy alone. An increasing portion was also being sold to Chinese companies for processing in Asia, Mediterranean oil traders said.
Traditional clients such as Italy's Eni and Saras as well as oil majors like ConocoPhillips and Total are also attending the talks.
A FRIEND IN NEED
Many international trading companies attending the meetings, like Vitol and Gunvor, were suppliers of fuels to the forces that opposed and ultimately overthrew Muammar Gaddafi when other more risk-averse firms balked at economic sanctions.
Industry sources say they will now be seeking to convert wartime assistance into tangible rewards.
Vitol in particular is widely seen as a top contender in the negotiations given the firm's early support for the rebel government. It was a top fuels supplier to Libyan oil firm Agoco during the eight-month conflict and was the first to buy Libyan oil in April.
In an indication of how important these talks are to Vitol, the firm's chief executive Ian Taylor is expected in Istanbul this week, oil industry sources told Reuters.
If Taylor comes, it would not be his first meeting with the NOC's new leaders. A senior NOC source said Taylor has already travelled "several times" to Tripoli and Benghazi this year.
Oil traders said that more oil for trading houses could lead to Libyan supplies being sold to a greater range of buyers since traditional buyers from integrated oil majors tend to export crude along fixed supply routes to their own refineries.
One oil trading source with a refiner said that allowing oil traders to buy crude oil directly from the NOC could create confusion in the market and depress Mediterranean crude oil prices to Libya's determinant.
"Traders always try to sell oil before they have it and people will start offering the same cargo 20 times and the market will be perceived as long. It will discount their (Libya's) own equity," he said.
"They would give up control and the oil will end up in all sorts of places that the Libyans don't want to be associated with." (Reporting by Emma Farge)