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EXCLUSIVE: Libyan rebels will reward their ‘friends’

Libya’s TNC shuts door on Ghanem; post-conflict oil output to soar; Tarhouni vows to honour Qadhafi-era contracts

In the latest of a series of exclusive reports from Benghazi, the capital of rebel-held east Libya, Transitional National Council finance minister Ali Tarhouni and Agoco officials talk to Petroleum Economist's Derek Brower about the future of the country’s oil industry

NEW OIL contracts in post-conflict Libya will go to countries that back the rebellion against Muammar Qadhafi, senior figures in the rebel-controlled oil industry said. But there will be no place for Shokri Ghanem, head of Libya’s National Oil Company (NOC), once Qadhafi goes, they added.

Transitional National Council (TNC) officials also claimed that the country’s oil production could rise to 3 million barrels a day (b/d), almost double the volume before the war.

Existing contracts, including those with companies from nations that have criticised Nato’s bombing of Qadhafi forces, will be respected, the TNC’s finance minister, Ali Tarhouni, said. “As a matter of principle, we will honour all treaties and contracts, regardless of our view of those contracts,” Tarhouni told Petroleum Economist in an interview in Benghazi.

But he also indicated that new contracts, should the rebels topple the Qadhafi regime, would go to countries that have supported the rebellion. “We definitely appreciate the allied assistance in terms of the no-fly zone,” he said. “We’re really indebted to our friends who helped make that decision a reality.”

Funding the rebellion

The TNC was also happy with agreements reached in Doha, Qatar, last week, which broadened international recognition of the fledgling government, froze some of Qadhafi’s foreign financial assets, and proposed plans for a fund to help finance the rebellion.

The TNC will tap “expertise” from across the world as it rebuilds, said Tarhouni. “The Libyan people will remember their friends – there’s no question of that,” he added.

And with bold plans to increase the country’s oil production, which stood at 1.6m b/d before the rebellion, post-conflict Libya will need heavy investment. Neither Arabian Gulf Oil (Agoco), a rebel-controlled unit of state-owned NOC, nor the TNC yet know the full extent of damage to oil infrastructure in Ras Lanuf, Brega and Zuitina – three coastal towns that have seen heavy fighting in a battle to control Libya’s oil industry.

“Everything can be repaired,” an advisor to Agoco who is also assisting the TNC, said. “We’re willing to pay the cost [of the rebellion] in blood, so we’re also willing to pay in money.”

NOC will also remain critical to rebuilding the oil industry when the war ends, he said. “NOC in Tripoli is not all bad. Some of the people there are very capable and honest.” But he was adamant that NOC boss Ghanem will have no future in a post-Qadhafi Libya.

And the advisor insisted a new government will be “ready to deal” with foreign investors in a way the Qadhafi regime was not. “There’s lots of talk behind the scenes to create a new philosophy for NOC,” he said. “In future, the priority is to deal with first-class companies from Europe, Canada and the US.”

Big oil welcome

Agoco echoed those comments. Abdeljalil Mayuf (pictured), head of the company’s communications, told Petroleum Economist that “big companies” – he named Shell, BP, ExxonMobil and Chevron – would be particularly welcome partners.

“Small” firms from Russia, China, Algeria, India and Brazil – all countries that have either criticised the Nato action, or supported Qadhafi – would not be welcome, he added. Brazil’s Petrobras, Russian Gazprom and Algeria’s Sonatrach are among the firms that have secured upstream contracts in Libya in recent years.

Production of 2 million b/d – 400,000 b/d more than Libya’s output before the war – is easily achievable, a TNC  source said. Meanwhile, Agoco, which accounted for just over a quarter of the country’s production before the war, including from fields near Tripoli, says 3 million b/d is possible. This would put the country’s output well beyond its Opec production quota. But Osman said the country will remain a member of the cartel – provided a new parliament to be created in post-Qadhafi Libya agrees.

Recent upstream deals, including BP’s 2007 agreement to explore the onshore Ghadames and offshore Sirte basins, could yet yield new production, said Agoco. But it also said new prospects, such as the Soltan field south of Benghazi, could rapidly increase output. Agoco has already drilled eight wells there, with initial flows of about 50,000 b/d.

Meanwhile, the battle for control of Libya’s oil-exporting towns on the Mediterranean coast continues to rage – and many military experts say the conflict is nearing a stalemate, with little hope for a swift end to the bloodshed.

But should the rebellion triumph, Western investment opportunities will not be limited to the oil industry. Tarhouni said: “I think the private sector should play a role in the transition period because the private sector should play a leading role for the future of Libya. It is an important part of the solution to this crisis.”

A way to go yet

All of that is some way off. Although the Agoco advisor said he recently briefed Western oil representatives in London, contact with potential investors has been minimal, the TNC said. This is despite a recent visit to Benghazi by Paolo Scaroni, boss of Italy’s Eni, and the arrival in the town last week of UK and French envoys.

And talk of opportunities for Western oil firms and contractors will yield uncomfortable comparisons with post-invasion Iraq, where US companies won large contracts even while a civil war raged around them.

The discomfiting similarities with Iraq don’t stop there. Already, arguments are brewing among factions in the rebel-held east, including a dispute between the TNC and Agoco over plans to give control of rebel-held oilfields to a new Benghazi-based state-owned oil company.

Tarhouni has appointed Waheed Boughaigis to head this company, and his efforts to sack senior executives at Agoco, part of a strategy to bring the firm more closely under the TNC’s control, have so far met with stiff resistance.

A senior Agoco source said the company would not co-operate with Boughaigis, who sought to dismiss Agoco’s present chairman on the same day Qadhafi’s troops launched a missile attack on the Misla oilfield, shutting down its production and that at the nearby Sarir field, too.

Tarhouni insisted that the matter would be resolved. “I’m in charge now,” he said. “I’ll make the right decision that helps us achieve our goals.”

But appeasing Agoco, which controls the only oilfields within the rebels’ territory, remains critical. Boughaighis and others from Benghazi NOC would not be interviewed by Petroleum Economist.

See also: Libya’s rebels beg West for cash  |  Libya rebels eye oil restart ‘in weeks’

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