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EXCLUSIVE: Libya rebels eye oil restart in weeks

The resumption of oil production, and exports, from rebel-controlled Libyan oilfields is vital to the success of the insurgency

In the first of a series of exclusive reports from Benghazi, the capital of rebel-held east Libya, Petroleum Economist’s Derek Brower reports on TNC plans to resume oil production from desert fields – giving the insurgents a much-needed source of cash

OIL production from the key, rebel-held Sarir and Misla oilfields in eastern Libya could be on stream again within weeks, senior sources in the Transitional National Council (TNC) claimed. The export pipeline connecting the fields to Tobruk has not been damaged, they added.

The oilfields, which produced around 300,000 barrels a day (b/d) before the rebellion began on 17 February, were shut in after forces loyal to Muammar Qadhafi shelled surface facilities above Misla on 4 April.

An advisor to Arabian Gulf Oil (Agoco), which operates the fields, told Petroleum Economist in an interview in Benghazi that a team of specialists was dispatched to the facilities on 14 April to assess damage. The convoy included military personnel.

“We are optimistic that it could be between days and weeks,” he said, referring to the TNC’s hopes of re-starting oil production. Osman is also acting as an advisor to the TNC. A source at Agoco said the fields would probably be on stream “within weeks, not months”. 

Sabotage

The sabotage, part of Qadhafi’s forces’ strategy to prevent rebels in eastern Libya gaining oil-export revenue to support their military campaign, damaged a generation unit that powered field-processing facilities, as well as a fuel tank, pipeline manifold and metering equipment.

Agoco, which showed extensive footage of the damaged units to Petroleum Economist, said the fire was successfully brought under control within 24 hours of the attack. Damage is thought to have been caused by missiles fired from a Grad, a truck-mounted multiple rocket launcher. Grads can have an attack range of up to 30 km.

Sources at Agoco and the TNC have asked Nato to prevent another attack on the facilities. But this may be difficult. A platoon of troops loyal to Qadhafi is thought to have crossed the country several hundred kilometres south of the main theatre of war – along the coastal road in the north – to attack the Misla oilfield facilities.

The pipeline from the Misla and Sarir fields to Tobruk, the only export terminal in the hands of east Libya’s rebels, was slowly shut down after the attack to prevent a build up of waxy residue, but can be brought back on line as soon as oil production resumes.

Exports of Sarir and Misla crudes from the port of Tobruk are critical to the rebels’ war effort. Qatar Petroleum has agreed to find buyers for the crude, when production resumes.

And although three crude cargoes have left Tobruk since fighting began, only one has yielded the TNC any revenue. Profits from the first two of these cargoes – a 1 million barrel sale to a Chinese firm and a 600,000 barrel cargo sold to Austria’s OMV – went to Qadhafi’s government in Tripoli, under terms agreed before fighting began.

A 1 million barrel cargo sold to Swiss trader Vitol on 6 April remains the rebels’ sole export. (Libyan crude sold from Tobruk is priced at Brent minus $1 a barrel, meaning the cargo brought revenue of around $120 million to the fledgling Benghazi government, said a source.) China is thought to have bought that oil. But the TNC, encouraged by the Contact Group of nations that met in Doha last week to discuss the Libya crisis, said it hopes to secure the income generated by the first two sales, provided it can gain access to Qadhafi’s funds. Several countries have said they will freeze Qadhafi’s foreign assets.

Wahda Bank in Benghazi is operating as the rebels’ central bank and handled the Vitol deal.

Funding critical

Access to new funds is growing critical. Rebel weaponry remains basic, with little sign of foreign arms having reached the frontline when Petroleum Economist was in Ajdabiya, one of the contested cities along the coastal road. Food and water supplies, even in Benghazi, are quickly diminishing. Many gasoline stations are empty and long queues are forming at others.

With only two oil refineries under rebel control – Tobruk’s 20,000 b/d plant and Benghazi’s 10,000 b/d unit, both mainly topping facilities producing fuel oil for electricity generation – Agoco said it had just “one or two months” worth of transport-fuel supplies left.

That includes 25,000 tonnes of gasoline that rebels seized from a Greek-flagged tanker heading to Tripoli on 15 March. Qatar has also begun supplying fuel to the rebel-held east as a “gift to the people of Libya”, Osman said.

See also: Libya's rebels beg west for cash

This story was amended after publication.

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