Global energy powerhouses are once again pumping oil in Libya, and Canada’s largest crude company may soon be among those returning the country.
Suncor Energy Inc. said Monday it is talking with its Libyan partner about restarting their shared oil project, and the Libyan chairman of the pair’s joint venture expects production to resume in a “few weeks.”
It could reach its full potential of 100,000 barrels a day by the end of the year, said Abdulwahab Elnaami, the partnership’s chairman in Tripoli, Bloomberg News reported.
Libya stands to benefit most from the renewed activity, while European countries that suck up the vast majority of the African country’s production will also be relieved. Libya’s coffers are largely padded by oil and gas activity – it pocketed $40-billion from energy exports last year, most of which went to Europe. Global oil prices will also be affected.
Suncor’s fortunes, however, will not undergo a dramatic change. Given Suncor’s steely focus on the oil sands, investors aren’t overly concerned by what happens with Suncor’s Libyan and Syrian properties, which are expected to be sold once they are spruced up and the price is right.
While Libya’s transitional government has gained global recognition, there is a danger in returning so quickly to a country torn apart by civil war. But because so few of the world’s largest oil fields are open to public companies, instead controlled by sovereign oil firms, Joseph Doucet, a professor of energy policy at the Alberta School of Business at the University of Alberta, believes companies are making a risky, but wise, choice.
“I think they are anxious to get a toe hold, to secure a spot they might be able to use should the [new]regime be one that is open to commercial arrangements,” he said. “For this one, it is now or never. And since there are so few of those opportunities, it makes perfect sense.”
Italian energy giant Eni SpA, France’s Total SA and Germany’s Wintershall have all turned on the taps in Libya, which satisfied 2 per cent of the world’s production prior to country’s industry collapsing as civil unrest turned into a civil war earlier this year. While Moammar Gadhafi has lost power, he has not been captured and loyalists remain resistant to the new transitional government.
“It certainly is encouraging that a number of governments are showing their commitment to helping rebuild,” said Kelli Stevens, a spokesperson for Suncor in Calgary. “We’re still standing on the outside looking in to see just what the situation is.”
Rick George, Suncor’s chief executive officer, said earlier this month that he is “certain” his company will return to Libya. Suncor has a 49-per-cent stake in a Libyan joint venture, Harouge Oil Operations. The remaining 51 per cent is controlled by the Libyan government.
Suncor is speaking with Harouge, not representatives from the transitional government, Ms. Stevens said.
The Calgary-based company, which inherited its African assets after it merged with Petro-Canada, will not return to Libya until it has “clarification of contractual and legal framework that we would be working in, and knowledge about how the institutions in [the]country are functioning during this rebuilding period,” Ms. Stevens said.
Safety, and assurances that labour and services will be available, are also among Suncor’s top concerns.
Officials from the Libyan transitional government have said the new government would respect past contracts and not rush into any new deals.
The price of Brent crude, the European benchmark, has been volatile throughout Libya’s six-month civil war, owing to uncertainty over how badly damaged oil fields and infrastructure were, and when production would resume. As Libya’s oil exports strengthen, the price of Brent oil may drop as more crude hits the market.
However, experts say it could take a year or more before Libya reaches its prewar production of 1.6 million barrels of oil equivalent a day. Italy’s Eni produced 273,000 barrels a day in Libya prior to the war, making it the largest foreign player. Eni was the first foreign company to sign an agreement with the then-rebels to restart work in Libya, and the chief executive officer’s visit to the capital was the first by a foreign CEO.
With files from Eric Reguly and Associated Press