Libyan government regains control of oil infrastructure

13 March 2011

Limited damage to facilities, but near-term exports unlikely

Government forces have retaken the strategically important town of Al-Zawiyah, and the oil hubs of Ras Lanuf and Es Sider, regaining control over the oil infrastructure and export facilities over the western and south-western oil system.

The advance means the Libyan government could restart exporting, even though the bulk of oil production is located in the eastern part of the Sirte basin, which is still under rebel control.

The fighting has caused limited damage to facilities in Zawiyah and Ras Lanuf. The challenge will be the power supply because of a prolonged outage of the Es Sirte power plant.

Intense fighting is continuing in and around the towns of Brega, Bin Jawad and Ajdabiya. For exports to resume, one of the parties will need to have uncontested control over the Marsa el-Brega oil and LNG terminal, experts say, as Marsa el-Brega, Al-Zawiyah, and Ras Lanuf are too close for tankers to risk mooring if violence persists in any of them.

International aversion to the Qaddafi regime might also preclude a quick resumption of the oil trade.

“A re-established regime under long-term leader Colonel Muammar al-Qaddafi will face massive international isolation, potentially making the quick resumption of oil exports a struggle, as relationships with IOCs [international oil companies] also will have been impacted,”  says an IHS Insight report.

As the armed forces battle it out, production is falling further.

French oil company Total’s Al-Jurf offshore field in western Libya has completely halted operations. Paolo Scaroni, the chief executive officer of Italy’s Eni, told Dow Jones that he expected all of the company’s production to be completely shut down in the coming days.

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