Libya's Oil Industry: Don't Expect a Quick Comeback

VIVIENNE WALT | SEPTEMBER 2011 | SOURCE: Time World

With Colonel Muammar Gaddafi all but gone, Libya's prospects can be summed up in one word: oil.

Far different from the revolutions in Tunisia or Egypt, or the rebellions in Yemen, Bahrain or Syria, the possibilities of Libya's new leaders either forging a new democracy or being forced to fight a lingering insurgency could depend heavily on how they kick-start the oil sector, which accounts for about 95% of Libya's earnings and which will finance virtually every penny of Libyans' public services.

Libya's Oil Industry: Don't Expect a Quick Comeback

How easily the oil industry can piece itself together is unclear, however. Listening to Ali Tarhouni, the Oil and Finance Minister for the rebels' National Transitional Council (NTC), it sounds simple enough.

He told CNN last week that the six-month war appeared to have damaged only "about 10%" of the oil infrastructure, and also said he was astonished to discover that Gaddafi's forces had not blown up or burnt key facilities — like the oil refinery in Zawiyah, 30 miles west of Tripoli — as they faced a devastating defeat.

The Libyan council has said it will honor the current contracts signed with big oil companies, including deals with BP, ConocoPhillips, Marathon Oil and many others. But they also insist Libya's oil industry will work very differently once a new government is in place, and that they could open up bids to new players like China and Malaysia.

"We want to do away with the shadowy, corrupt way which Gaddafi and his cronies ran the oil business," the NTC's London representative Guma el-Gamaty told al-Jazeera last week. "Contracts will be awarded on merit, not on political favors."

Given that, Western oil companies can expect no special favors, simply because their countries led NATO's Libya campaign. In Iraq, for example, Chinese energy companies signed huge contracts, despite the fact that China opposed the U.S.-led invasion that drove out Saddam.

"China supported nothing, but it came in with the money and the bids," says Julian Lee, senior analyst for the Center for Global Energy Studies in London. "When it comes down to it, whatever rebel movements say in the heat of battle — when it comes down to allocating contracts in a calmer environment, it will be a hard-nosed commercial negotiation."

And as much as the rebels owe Western countries their victory, they are all too aware that those same Western countries — Britain, France, and the U.S. — were deeply embroiled in intelligence sharing with Gaddafi; in Britain and the U.S. cases, they even apparently aiding in renditions of militants to Libyan torture cells. "Nobody's hands are clean," Lee says.

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