3:03pm

Thu April 7, 2011
Conflict In Libya

Oil A Major Prize In Fight For Control Of Libya

In the fight for control of Libya, the country's lucrative oil industry is a major prize.

For weeks, the fighting between Libyan rebels and forces loyal to Libyan leader Moammar Gadhafi has seesawed along a major highway that hugs the Mediterranean coast — one day the rebels capture a strategic city, the next day Gadhafi's forces take it back. It is a vicious fight for control, but then this stretch of coastline is prime real estate because it contains Libya's main oil ports, says Greg Priddy, analyst of global energy and natural resources at Eurasia Group.

"Roughly half of Libya's total exports came out of two ports located near Ras Lanuf. ... Those two combined were 650,000 barrels a day out of exports that were about 1.3 million a day. So that's why the fighting over the Ras Lanuf area has been so strategically significant," he says.

But even if one side in the conflict could hold on to the area near an oil terminal, that doesn't mean the oil would start flowing. There are security and technical challenges. Jim Burkhard, the managing director for global oil at IHS Cambridge Energy Research Associates, says there's also the legal question.

"The global oil industry is still — there's still a great deal of concern and uncertainty about the legal framework around Libyan exports. When you have a country that's in civil war and its not clear who is in charge, who gets the revenue, who has the legal right to sell the oil, yes, it gets a little murky," says Burkhard.

The United Nations sanctions on Libya don't prevent rebels from selling oil. But given the legal tangle, Burkhard says many oil companies are skittish about getting involved at the moment.

The Persian Gulf state of Qatar has offered to help the rebels by marketing their oil in return for food, money, medicine and the like. Burkhard thinks most people would see it as a sign of support for the rebels.

"And perhaps if there is as a way to build up momentum to have more countries recognize the rebels as the legitimate government of Libya and, if so, that could lead to a more sustained and higher level of Libyan exports," says Burkhard.

Earlier Thursday, a massive oil tanker pulled out of a port near the eastern city of Tobruk, which is firmly under rebel control. It's believed to be carrying 1 million barrels of oil.

Michelle Wiese Bockmann, the markets editor with Lloyds List, a global daily shipping newspaper in London, has been tracking the tanker. She says this is the first known shipment being sold by the rebel-controlled Arabian Gulf Oil Co.

The Equator tanker was chartered by Dutch-Swiss oil trader Vitol and is owned by Greece-based Dynacom Tankers, Bockmann says. But what's not clear is whether Qatar is involved, or where the tanker will end up. According to satellite tracking data, Bockmann says, it is headed for Singapore.

"Shipping is not a very transparent industry; I mean this is a very sensitive commercial shipment and it's more commercially sensitive than most," she says.

But 1 million barrels of oil is just a drop in the bucket compared with Libya's pre-conflict output. And the rebel-held oil fields are small compared with those still under Gadhafi's control. Still, there is concern that Gadhafi may launch small attacks on the eastern oil facilities as a way to prevent rebels from exporting. The Eurasia Group's Priddy says that so far, neither side in the Libya conflict has launched a full-scale attack on the oil facilities.

"Nobody has gone in and tried to do a scorched earth policy where they would destroy things as they withdrew. ... They've been hit by stray fire but nobody has deliberately tried to completely destroy them," Priddy says.

But that could change if the conflict in Libya intensifies. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, host:

In the struggle for control of Libya, the country's lucrative oil industry is major prize. Fighting has been ferocious around key oil facilities on the Mediterranean coast. Libyan rebels could desperately use the petro dollars to buy weapons.

But as NPR's Jackie Northam reports, getting the product to market is not easy.

JACKIE NORTHAM: For weeks, the fighting between Libyan rebels and pro-Gadhafi forces has seesawed along a major highway that hugs the Mediterranean coast. One day the rebels capture a strategic city. The next day, Gadhafi's forces take it back.

It's a vicious fight for control. But then this stretch of coastline is prime real estate, because it contains Libya's main oil ports of Ras Lanuf and Sidra, says Greg Priddy, analyst of global energy and natural resources at Eurasia Group.

Mr. GREG PRIDDY (Analyst, Global Energy and Natural Resources, Eurasia Group): Roughly half of Libya's total exports came out of two ports located near Ras Lanuf. Those two combined were 650,000 barrels a day out of exports that were about 1.3 million barrels a day. So that's why the fighting over the Ras Lanuf area has been so strategically significant.

NORTHAM: And at about $100 a barrel, that's a lot of money. But even if one side could hold on to the area near an oil terminal, that doesn't mean the oil would start flowing. There are security and technical challenges.

Jim Burkhard, the managing director for global oil at IHS Cambridge Energy Research Associates, says there's also the legal question.

Mr. JIM BURKHARD (Managing Director, Global Oil, IHS CERA): The global oil industry is still, there's still a great deal of concern and uncertainty about the legal framework around Libyan exports. When you have a country that's in civil war and it's not clear who is in charge, who gets the revenue, who has the legal right to sell the oil, yes, it gets to be a little murky.

NORTHAM: The U.N. sanctions on Libya don't prevent rebels from selling oil. But given the legal tangle, Burkhard says many oil companies are skittish about getting involved at the moment.

The Persian Gulf state of Qatar has offered to help the rebels by marketing their oil in return for food, money, medicine and the like. Burkhard says that might help attract others to do the same.

Mr. BURKHARD: I think most people would see it as a sign of support and perhaps as being a way to build up momentum to have more countries recognize the rebels as the legitimate government of Libya. And if so, that could then lead to a more sustained and higher level of Libyan exports.

NORTHAM: Earlier today, a massive oil tanker pulled out of a port near the eastern city of Tobruk, which is firmly under rebel control. The tanker is believed to be carrying a million barrels of oil.

Ms. MICHELLE WIESE BOCKMANN (Markets Editor, Lloyd's List): This is the first shipment we know of that's being sold by the rebel-controlled oil company.

NORTHAM: Michelle Wiese Bockmann is the markets editor at Lloyd's List, a global daily shipping newspaper in London, which has been tracking the tanker which just left Libya. She says what's known is who owns the tanker and who chartered it. Bockmann says it's not clear if Qatar is involved, or where the tanker will end up.

Ms. BOCKMANN: Shipping is not a very transparent industry. I mean, this is a very sensitive commercial shipment and it's more commercially sensitive than most.

NORTHAM: But a million barrels of oil is just a drop in the bucket compared to Libya's pre-conflict output. And the rebel-held oil fields are small compared with those still under Gadhafi's control. Still, there is a concern that Gadhafi may launch small attacks on the eastern oil facilities as a way to prevent rebels from exporting.

The Eurasia Group's Priddy says, so far, neither side in the Libya conflict has launched a full-scale attack on the oil facilities.

Mr. PRIDDY: Nobody has gone in and tried to do a scorched earth policy where they would destroy things as they withdrew. They've been hit by stray fire but nobody has deliberately tried to completely destroy them.

NORTHAM: That could change if the war in Libya intensifies.

Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright National Public Radio.