Analysis: Hidden dangers in 'new' Libya

By Fred Enochs, Partner TD International

The sudden successful surge by the rebels in Libya has buoyed the confidence around the world that a quick end to the Qaddafi regime is near and that stability within the nation will soon return. No one seems happier at the moment than Western oil companies looking to return to Libya and resume pre-conflict operations.

Without raining on that parade, there are many new risks that must be understood and managed in order to allow energy companies and their personnel to safely return, operate and prosper while restoring Libya’s oil output to previous levels.

Some areas to consider include the following:

Damage assessment to critical infrastructure: While it appears that the damage has been minimal, reporting is currently spotty and probably inaccurate. Companies will need good assessments of damage to production, midstream and export infrastructure to determine what it will take to return to operation.

Security: Even with the conflict apparently near an end, as previous similar situations have shown, sabotage and infrastructure and personnel attacks by Qaddafi loyalists as well as political turmoil should be expected. Oil companies and their security officers will need to work very closely with the new government to ensure proper protection for facilities and personnel.

Governance: Libya will be a vibrant and changing situation following takeover by the rebels. A big issue is how the Transitional National Council will manage the transition to a new governing structure and what the new structure will look like. Libya is a tribal based society that also has east/west and north/south tensions that will further complicate the roles played by all parties in a new governing structure. With whom within the new organization can and should oil companies develop working relationships? Will the new governing body choose to fully accept previous contractual arrangements or will the new leadership require re-negotiations with the energy companies? All of these questions are currently undetermined, but will need to be effectively managed in order for companies to be successful in this new nation.

Competition: The new (and hopefully improved) access to Libya’s potential oil wealth will create a mad rush for existing and new companies to enter the fray. How will companies jockey amongst these competitors, gain that competitive edge and emerge successful?

To understand and manage all of this uncertainty in Libya’s rapidly changing environment, successful companies will require accurate and timely on the ground information to drive their strategies and protect their assets and people. Those that best understand the new governance, forge the right relationships, and understand their competitors’ tactics will be positioned to succeed in the new, emerging country.

Fred Enochs, based in Houston, is a partner at Washington, D.C.-based TD International. He supports the domestic and international energy, finance and commodity trading sectors by providing clients with targeted intelligence and advisory services. He is a former technical and operations officer with the Central Intelligence Agency and commercial director for a Fortune 10 energy company who has also developed or led risk-management-consulting groups.

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