Can International Oil Companies Restore Libyan Oil Production?

With the war over, Libya has opened itself back up to international oil companies with operations in the country, and according to Ahmed Jehani, minister for reconstruction in Libya’s new administration, the speed with which oil production is restored depends wholly on the oil companies.

Italy’s Eni SpA (NYSE:E), France’s Total SA (NYSE:TOT), and the U.S.’s Marathon Oil Corp. (NYSE:MRO),Occidental Petroleum Corp. (NYSE:OXY), ConocoPhillips (NYSE:COP), and Hess Corp.(NYSE:HES) are just some of the oil companies with major investments in Libya. Total SA CEO Christophe de Margerie says the company’s offshore al-Jurf oil field could be ready to start “quite quickly”.

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There was little damage to infrastructure, said Jehani, and most companies will just have to restore pressure to wells and clean sludge out of pipelines and storage facilities that have been sitting idle for many months. “Many of our fields are concessions held by international companies so they are the ones that have to do the work, we can’t do it for them,” said Jehani in an interview in Paris, where he is attending an international conference on Libya. “It depends on how fast they deploy back to the country.” He expects production will return to pre-war levels “within a reasonable time”.

Libya’s former top oil official Shokri Ghanem says crude production is unlikely to return to pre-conflict levels of over 1.5 million barrels a day until the end of 2012, while Jehani says, “It could be faster than some people think.” Prime Minister Silvio Berlusconi of Italy, the largest buyer of Libya’s energy output, says that Italian oil company Eni SpA (NYSE:E) hopes to re-open a gas pipeline between the two countries by October 15.

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At the convention in Paris yesterday, the international coalition that helped bring down Muammar Qaddafi pledged to help Libya’s National Transitional Council. Today, Jehani meets with experts from the World Bank, United Nations, and European Union to discuss possible aid packages to help the country recover from its six-month conflict to seize power from Qaddafi. Jehani says it could take up to two months for them to do a full assessment, especially because they cannot currently assess damages in Bani Walid and Sirte, which are still under Qaddafi’s control.

Yesterday, 60 nations dubbed the “Friends of Libya” released billions of dollars in frozen funds to Libya for humanitarian aid and reconstructive efforts. So far, the U.S. has released over $700 million of its $1.5 billion in frozen Libyan assets. France plans to release 1.5 billion euros ($2.1 billion) by the end of the week, to be used solely for humanitarian needs. Libya’s annual government budget is about $20 billion.

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