Oil Producers Cautious on Libyan Output as Rebels Advance

Foreign oil producers in Libya, where rebels have entered Tripoli in a push to end Muammar Qaddafi’s 42-year rule, said it’s too early to consider restoring output at halted fields.

Libya, home to Africa’s largest oil reserves, produced more than 1.5 million barrels a day before the start of the civil war in February. Italy’s Eni SpA, Russia’s OAO Gazprom and others idled oil and gas fields and evacuated staff, cutting the country’s output by more than 90 percent. Eni has said it may take a year to get fields back to full capacity.

“It is important that the political situation should stabilize first and the legitimate leadership be established and ministers appointed,” Ivan Gogolev, a spokesman at Gazprom International, said today by telephone. The Moscow-based gas company has two exploration blocks in Libya and is a partner in producing fields. “Only then will we assess when we can come back, but it is understandable that we want to be back.”

The U.S., U.K., France and Italy, allied nations supporting the rebels with air power, are working with Libya’s National Transitional Council to restore oil production, Italian Foreign Minister Franco Frattini said in an interview with La Stampa. Rebels are holding three of Qaddafi’s sons after sweeping into the capital yesterday and continue to search for their father.

‘Very Positive’

An end to the conflict would be “very positive” for oil companies, Eni Chairman Giuseppe Recchi said in an interview in Rimini today. The Rome-based company, the largest foreign oil producer in Libya, isn’t concerned a new government will try to renegotiate contracts because current agreements are protected by international law, he said.

BASF SE’s Wintershall AG unit, a German producer, was among companies to halt Libyan operations in February as rebels rose up against the government. The Kassel-based company, which has concessions in the country with partner Gazprom, had been pumping as much as 100,000 barrels of oil a day.

“At the moment it is too early to predict when, how and under what conditions the production in Libya might begin again,” Stefan Leunig, a spokesman for Wintershall, said in an e-mail. Production could resume “within several weeks,” depending on the state of facilities and security, he said.

OMV, Repsol, Total

Central Europe’s biggest oil company, OMV AG, Spain’s Repsol YPF SA, France’s Total SA and U.K.-based BP Plc also have operations in Libya. OMV was forced to halt production at the Shateira field in February.

“We are watching further developments in Libya,” said Sven Pusswald, a spokesman at OMV. “We don’t have any bilateral contact” with the rebels, he said.

Spokeswomen for Repsol and Total said the companies are monitoring events to determine when a restart may be possible, while BP spokeswoman Sheila Williams said the company won’t return staff to Libya while unrest continues.

Brent crude futures fell as much as 3.2 percent to $105.15 a barrel in London on optimism that Libyan production will resume. Eni shares gained 6.3 percent to 13.27 euros at the 5:30 p.m. close in Milan, the biggest one-day jump since May 2010.

It will take about a year to restore Libyan oil output fully and about two to three months to bring back full gas flows, Claudio Descalzi, head of exploration and production at Eni, said July 29 on a conference call. Eni’s oil and gas volumes in Libya have fallen to about 50,000 barrels a day from 280,000 a day because of the conflict.

Take Time

“This is good news for Eni, but to be reassured we’ll need to know what plans the rebels have and whether they can quickly pacify and manage the country,” said Massimiliano Romano, head of research at brokerage Concentric Italy in Milan. “Between that and getting production going again I think it will take some time before the companies are making money in Libya.”

In Tripoli, government forces offered little resistance as celebrations broke out in Green Square, the location for pro-Qaddafi rallies in recent months. Clashes erupted outside Qaddafi’s headquarters, Agence-France Presse reported. Regime spokesman Moussa Ibrahim said the leader was ready to negotiate with Mustafa Abdel Jalil, head of the rebel council, and asked for an immediate cease-fire.

“The interim regime is likely to concentrate on getting oil production going again and rebuilding the infrastructure,” said Thina Saltvedt, an oil analyst at Nordea Bank AB in Oslo. “The amount of oil produced will be limited in the short term.”

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