OGJ Oil Diplomacy Editor
LOS ANGELES, Mar. 29 -- Libyan rebels say they have forged an agreement with Qatar that will enable them to begin exporting oil and accessing the revenues through an escrow account.
“We contacted the oil company of Qatar and they agreed to take all the oil we export and market that oil for us,” said Ali Tarhoni, the rebel representative responsible for economy, finance, and oil. Tarhouni also sits on the newly created Libyan National Council.
“We are producing about 100,000-130,000 b/d, we can easily up that to about 300,000 b/d,” Tarhoni said, adding that he expected exports to begin in “less than a week.”
Qatar Petroleum said it had no comment on the report, but Qatar’s government announced its recognition of the rebel council as the sole legitimate representative of the Libyan people.
“This recognition comes from a conviction that the council has become, practically, a representative of Libya and its brotherly people,” Qatar’s state news agency reported, citing a Foreign Ministry official.
The official said the government came to that decision because the rebel council included representatives of different Libyan regions and had acceptance among the Libyan people.
Tarhoni said he signed the contract with Qatar recently and that the deal would help ensure “access to liquidity in terms of foreign-denominated currency.”
The rebel government is eager to begin exporting oil to secure a steady flow of income, despite Tarhouni earlier saying that the government had enough cash for now (OGJ Online, Mar. 24, 2011).
Rebel forces advance
Tarhouni’s remarks came as rebels forces advanced from Ajdabiya through Brega, Ras Lanuf, and As Sidr. These towns, together with rebel-held Tobruk and Zouiatina, give the opposition control over five of Libya's six oil terminals.
The country’s remaining oil export terminal lies at Zawiya, which is still held by forces loyal to Libya’s leader Moammar Gadhafi.
London-based Exclusive Analysis (EA), which sees a prolonged stand-off developing in the country, reported that even if rebels capture Sirte and the oil towns on the coast, it is unlikely that anything more than a small fraction of oil exports would be resumed.
“The pipelines connecting the oil towns to the oil fields remain vulnerable to repeated sabotage attacks from Sebha and Sirte, which are increasingly likely,” the analyst said.
“Moreover, as long as pro-Gadhafi forces can attack pipelines, foreign oil workers needed for the resumption of full production are unlikely to return due to fears for their own safety,” EA said.
Meanwhile, reports suggest that the month-long shutdown of Libya's oil fields is already creating strains in the world's oil networks as consumers scour the world to replace its particular variety of sweet crude.
Although several members of the Organization of Petroleum Exporting Countries have ramped up production to offset the decline in Libya’s output, oil markets are concerned about the difference in quality.
Libya’s low-sulfur sweet crude is said to be easier and cheaper to refine than the crude from other OPEC producers such as Saudi Arabia.
According to Bhushan Bahree, an oil analyst with IHS CERA, the difference is forcing people to look at what their options are going forward, because it now looks clear that Libya supply might be disrupted for some time.
Bahree said Algeria, Angola, and Nigeria produce oil that is similar to Libya’s. As a result, demand for those crudes has surged since the crisis began, forcing up prices.
Nigeria's top contract Bonny Light and Algeria's Saharan Blend are now being listed at a $3.40/bbl and $2.85/bbl premium, respectively, over London's main contract—about double the premium in mid-February.
The difference in price and quality means that many refineries will eventually have to decide whether it is worth switching production to harder-to-refine—and less profitable—blends.
If the crisis is prolonged “it could conflict with a seasonal ramp-up in refinery production ahead of the peak summer driving season,” the US Energy Information Administration warned.
Despite the apparent need for more supplies Qatar’s Energy Minister Mohammed Saleh Al-Sada said there is no need for OPEC to hold a meeting before June as the market is in a comfortable position.
“We can’t see the real need [for a meeting] because the market is in a comfortable situation,” Al-Sada said on the sidelines of an industry event in Doha.
Oil prices had edged lower in light profit-taking on Mar. 25, but ended higher on the week, as supply threats from the Middle East and Libya and the ongoing crisis in Japan sidelined many players.
Contact Eric Watkins at firstname.lastname@example.org.
Libyan opposition announces plans to export oil