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Rush for Libya’s oil

Adriene Hill Aug 23, 2011

Rush for Libya’s oil

Adriene Hill Aug 23, 2011

Bob Moon: Rebels continued making inroads in Libya today. Opposition fighters now control Gaddafi’s compound and expect the country will be liberated within 72 hours.

But the end of the Gaddafi regime doesn’t mean the oil pipes will just be turned back on. Marketplace’s Adriene Hill reports.

Adriene Hill: Selling oil requires more than just having oil. You can’t just dig a hole in the ground and charge $80 a barrel. You need big equipment and pipes and roads and ports.

And, in Libya:

Said Hirsh: We simply have no idea what the scale of the damage is.

Said Hirsh is a Middle East economist at Capital Economics in London.

Hirsh: We don’t even know if the regime has any more fight in it and whether it will damage any more of the oil infrastructure before it actually leaves.

Hirsh expects that the transitional government and foreign oil companies invested in the region will pay for the rebuilding. He doesn’t expect too much change in how oil is produced in Libya, but thinks the government will spend more oil money in-country.

Hirsh: To actually pacify the different interest groups and the tribes in the country, it will have to make them feel wealthier.

Geoff Porter from North Africa Risk Consulting says the Transitional National Council, or T.N.C., has promised to honor all contracts with foreign oil companies. But:

Geoff Porter: That doesn’t necessarily mean that the T.N.C. is going to be the permanent government of Libya in the next two or three years.

And a new government could try to change those agreements.

Porter: When new governments come in, they tend to reevaluate pre-existing contracts and try to extract more revenue from the state from those contracts.

So even though the political future of Libya seems close to some sort of certainty, the future of its oil industry is far from settled.

I’m Adriene Hill for Marketplace.

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