Fear, wrangling hamper Libyan oil recovery

In Libya: Victory for rebels, but uncertainty for contractors

A speedy return of Libyan oil output to pre-war levels is facing new obstacles as foreign firms struggle to negotiate who will provide security for workers vulnerable to attacks in the desert and in cities bristling with weapons, a report said.

The largest contractors working on Libya's oil fields say most foreign companies still have no timeframe in place for returning evacuated staff, and few have volunteered to return, Reuters reported.

Libya, holder of Africa's largest oil reserves, is currently pumping around 500,000 barrels per day and industry sources doubt it can quickly triple output to pre-war levels, which represented around 2% of global oil consumption.

"Foreigners are not coming back any time soon. At the moment we are planning with a Libyan workforce, with the exception of a few expats who have opted to come back," a manager at one of Libya's largest oil services companies told the news wire.

Before the war, foreign workers, many with crucial expertise, made up as much as a quarter of the staff at some oil services companies.

Not only foreigners but some locals with expertise are also unwilling to return to the fields without a substantial pay rise or are demanding a change in management, industry sources say.

Foreign oil workers want protection by Western companies, believing they will provide better security. They are also reluctant to wait for the government to provide the troops required to secure vast and remote outposts in a process they say could take months.

"The companies we all speak with say they are insisting on having their own security that is up to Western standards, and this is a requirement for doing business," said a western security contractor.

But Libya's National Oil Corp. (NOC) and ruling National Transitional Council (NTC) are opposed to letting foreigners add to the array of fractious and heavily armed forces keeping the country under control.

"The NTC does not want expats used as security forces in the field, but more in a training role," said Chris Penketh, a UK-based consultant for the oil and gas industry, in Benghazi.

"Before there was no real market for international security companies - oil and gas operations here had armed guards but they were Libyan military or local oil company employees."

The oil service company manager said he did not expect a significant number of foreigners back before March 2012 at the earliest.

Adding to the difficulty of assessing the threat to workers and who should provide security, firms are wrangling over the costs of guarding vast stretches of desert and face demands from skilled workers for more money to return to vulnerable areas.

Negotiations can be frustrating and last for weeks.

Some companies say they are resigned to covering the bulk of the extra expenses in post-war Libya, at least until an army is assembled and deployed to oil fields.

"Contractors coming from abroad are asking for more, for their firms and their workers, with rises of 30% to 50%," said one contractor for a major oil firm.

"But Libyans are totally unreceptive to the need to increase pay and the increase has to be entirely absorbed by the foreign party," he added.

He said that Germany's Wintershall had already agreed to wage increases, while others, including Italy's Eni, were engaged in endless discussions over the terms of reactivated contracts.

Others appear to have found the procedure more harmonious and another manager at a major oil services company said the security cost issue had so far been an area where his firm was able to find a compromise with the Libyans.

"We say we cannot put our staff in danger, but the result will vary by agreement and volume of work," he said.

Even when both parties are cooperative, the scale of operations, which require assessing numerous and vast fields across remote parts of Libya's desert, will take a long time.

In the west of the country and in areas south of Mesla the majority of sites have yet to be checked.

"We can start in places that require less security, some fields are in very remote places and huge and that will take more time," the manager said.

The possibility of the country relapsing into war is also deterring oil companies from committing to the expensive process of sending back foreigners, and eventually their families.

"They need to make laws and put security in place, and I'm talking about security in general. Like in cities full of guns, the last thing that we want is a stray bullet killing one of our employees," said the manager at one of Libya's largest oil services companies.

Oil fields may be prime targets for guerrilla-style attacks, but rival military groups screeching through towns are still a worry in Libya and oil companies are struggling to cope with it.

A London-based oil trader visiting Tripoli this week was prepared to give up on a meeting with new Libyan oil managers after the entrance to a government building was blocked by a convoy of chaotic fighters flashing AK-47 rifles.

"Perhaps we should just leave," he suggested.

User

Become an Upstream member!

Membership includes a subscription to our weekly newspaper providing in-depth news from the energy industry, plus full-access to this site and its archives. Still not convinced? Try our free trial.

Already a member?

Login