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BRIEFING LiBYA/GCC


Libya has not shown Gulf Arabs preference with awarding oil contracts.


After GAddAfi back to black


Libya’s surprisingly speedy return to oil production could spark mixed feelings in GCC countries. TExT By Ryan HaRRison


stands out as remarkable. The country has left analyst forecasts in its wake to restore vital oil fields in record time. Already producing 600,000 barrels a


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day of oil in late November, Libya is in the process of restarting another giant field to help push the total close to 800,000 by the end of the year, according to the chairman of Libya’s National Oil Co., Nuri Berruien. Most analysts, including some at


the International Monetary Fund, had predicted the country would achieve less than half that amount. It contrasts to Iraq’s long struggle to resume production after suffering serious damage to its oil facilities. Oil states in the GCC may have found it difficult to join in the celebrations of Libya’s return to form. Earlier this year they unilaterally decided to increase production to compensate for the loss


32 / DECEMBER 2011


S DRAMATIC COMEBACKS go, Libya’s return to oil production


of Libyan supplies. But it’s inevitable now that they will face pressure to reduce their output, which means less revenue. Relations over oil between the GCC and Libya have been icy so far, but at a crucial meeting of Gulf Arab OPEC producers in December things could turn frostier. Libya said recently OPEC majors should cut production to make room for its returning marketshare. Production is expected to grow to full capacity by the end of 2012 or early 2013. If the behaviour of Libya’s new


government is anything to go by, GCC oil officials will have a fight on their hands at the meeting. It has not shown Gulf Arabs any preferential treatment with the awarding of oil contracts. Instead, companies including Western players Halliburton, Schlumberger and Baker Hughes are making regular trips to the country and are rumoured to be on the brink of returning to full- time work. Meanwhile, according to UK media, representatives of Libya’s National Transitional Council called City executives to a central London hotel to drum up British interest in the “massive opportunities” on offer. Simon Wardell, director of global oil


at IHS CERA, said: “The transitional government wants to move as quickly as possible to get oil back up and running. And as such are not thinking too much about from where they can bring oil companies. In the short term, Libya is looking at companies that have experience, especially service companies that can switch things back on quickly. Those firms will go in first. In the longer term there are potential concessions to be had on contracts for Gulf states that were more supportive of the regime that got into power.”


He added that Libya’s strength would displace the Gulf’s revenues from oil as governments are forced to “make room” for its increasing marketshare. What Libya’s National Oil Co.’s


Berruien means precisely when he said in London last month that he would “favour our friends” for new contracts, is still unclear. Unquestionably, it’s likely to cause a stir in the international community, especially given that Libya has 46 billion barrels of untapped oil reserves – the largest in Africa and eighth largest in the world. The biggest headache for GCC oil


producers is likely to be if Libya’s continued convalescence coincides with an economic meltdown in the Eurozone. If global growth sinks then it could pull oil prices down with it. There’s no doubt that the next few months will see the GCC carefully eyeing the Eurozone crisis, especially how it will be resolved. It could have a huge impact on revenue for oil producers as well as hindering their chances to fight for marketshare with Libya.


aFP


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