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Damage will delay full flow of Libya crude

Libyan rebel fighters stand guard outside the main administration building after seizing full control of the Zawiyah oil refinery on Aug. 18, 2011.


Libyan oil production will not return to pre-war levels until late next year at the earliest, with many of the country's oil facilities having suffered heavy damage and looting during the conflict, according to the newly appointed chairman of the country's National Oil Company.

Offering the most detailed assessment yet of the outlook for Libya's oil output in an interview with the Financial Times, Nuri Berruien said it would be late 2012 or early 2013 before the country was again producing the 1.6 million barrels per day it had before this year's uprising against Muammar Gaddafi.

While some production from the country's eastern fields should begin this month, the "initial oil output will be measured in the 10,000s of barrels a day rather than in the 100,000s of b/d", Mr. Berruien said. "In 15 months we can reach the pre-war level of 1.6m b/d," he said. "That is the optimistic forecast ... But I think there is reason for optimism."

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The return of Libya to the global oil market is critical to crude prices, which surged this year to a two-year high above $125 a barrel. Saudi Arabia has ramped up its production to the highest in 30 years to offset the shortfall while the International Energy Agency, the western countries' oil watchdog, co-ordinated a release of emergency reserves for the only third time in its history. Brent crude prices are now around $112.

Mr. Berruien's appraisal sits in between the most optimistic estimates by some upbeat oil executives, who put the recovery in weeks, and some of the most downbeat judgments issued by oil consultancies that have predicted it could take up to three years to restore full output. The state of Libya's oil facilities remains challenging, however. Oil fields and terminals had been heavily mined while camps for oil workers and service providers were looted, Mr. Berruien said. There were also concerns some wells would not produce again when workers opened the taps.

The main concern, he said, was the state of the country's export terminals, with three of the ports in the east changing hands several times during the conflict.

The oil terminal in Brega, a focus of much of the fighting, had been badly damaged by pro-Gaddafi forces and also struck by NATO bombs. Further west along the coastal road where much of the fighting in the past six months has taken place, the terminal in Ras Lanuf did not suffer any serious damage, Mr. Berruien said. But at the nearby facility in Es Sider, three storage tanks were burned down while the control room was totally destroyed.

Even so, the initial damage assessment was not as grim as feared. "The damage affects the support infrastructure, not the main production facilities," Mr. Berruien said, adding: "This is not Iraq. It will not take us five years to recover [to the pre-war output level]"

Mr. Berruien said that none of the foreign oil companies active in Libya had yet to return and added it could take weeks before they felt it is safe enough. However, he said officials from the National Oil Company were meeting with executives from companies including Eni of Italy, Total of France and Repsol YPF of Spain to discuss the situation on the ground.

"We will respect [the contracts signed during the Gaddafi-era]" he said. But he cautioned that Libya was unlikely to offer new exploration contracts to foreign oil companies until it had a new constitution and a democratically elected government.

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