By CLIFFORD KRAUSS
Published: March 28, 2011
HOUSTON — After seizing control of critical oil fields and terminals in eastern Libya over the weekend, Libyan rebels are now trying to sell oil in international markets, potentially raising hundreds of millions of dollars to buy weapons and supplies.
Oil industry officials, echoing claims made by a rebel leader, said Monday that they believed that Qatar had agreed to buy oil offered by the rebels and planned to ship it in leased tankers.
The Qatari government has not commented on the oil sales, but on Monday, Qatar became the first Arab country to formally recognize the legitimacy of the rebels as representatives of Libya. In addition, the recent military advances by the rebels were made possible by allied air support as well as critical logistical commitments from Qatar.
“There clearly appears to be some coordination, and money can buy you a lot,” said Michael A. Levi, a senior fellow for energy and the environment at the Council on Foreign Relations. “My guess is this will be more consequential for the conflict than for the oil markets.”
Over the last few days, the rebels have seized several towns with important oil installations that they said would enable them to produce and export crude. Although there is concern that the rebel advance may prove to be fleeting, oil traders responded to their victories by pushing down the price of most world oil benchmarks, albeit modestly.
On Monday, the price of the benchmark United States crude oil, West Texas Intermediate, fell by $1.48 a barrel, or 1.4 percent, to $103.92. The benchmark is 7.3 percent higher than it was a month ago, and 30 percent higher than a year ago.
Although the Libyan government faces global economic sanctions and asset freezes, an official at the Treasury Department said that the United States would not seek to block oil sales by the rebels if they could prove the money was not going to any Libyan government authority, the national oil company or the Qaddafi family.
“Everything owned by or controlled by the government of Libya is subject to sanctions,” said the official, who spoke on the condition of anonymity because no official determination had been made about the proposed oil sales. “Anything that is not is not governed by U.S. sanctions.”
According to news reports, the rebels claimed they would be able to produce up to 130,000 barrels of crude a day, less than a tenth of what Libya exported before turmoil erupted last month.
But they also have access to millions of barrels stored in coastal oil terminals, which have been effectively closed to tanker traffic during the conflict. The rebels now control all five eastern oil export terminals, including Es Sider, Ras Lanuf and Zueitina, roughly two-thirds of the country’s export capacity and a majority of its production and refining capacity, according to a research note by the Eurasia Group, a consultancy firm.
Francois Gauthier, the Algeria country manager for the Italian energy company Enel, estimated that there could be as many as two million barrels of oil stored in just one rebel-controlled oil port, Tobruk, that could be exported quickly. At an estimated sale price of $100 a barrel, selling the oil in Tobruk could raise as much as $200 million, although the rebels would probably have to share the funds with Western oil companies that co-own the leases on the fields.
“It’s a lot of cash, but it won’t solve all of their problems over the long run,” Mr. Gauthier said.
Libyan oil is particularly valued on world markets because it is high quality, needs little refining and is particularly well suited for European diesel markets.
With allied planes and naval vessels patrolling the area, Col. Muammar el-Qaddafi could be powerless to stop tankers from sailing into and out of Tobruk and other rebel-held ports. However, forces loyal to Colonel Qaddafi could still sabotage critical pumping equipment needed to transport oil from the fields to the ports.
The rebels already have their own oil company, Agoco, which is based in rebel-held Benghazi and broke away from the main national oil company early in the conflict. Agoco controls fields that represent 40 percent of the country’s 1.6 million barrels a day of output and operates an oil terminal and refinery in Tobruk.
Aside from a few refinery storage tanks, little of Libya’s oil infrastructure has been damaged in the fighting so far. The pumps, hoses, metering, docks and storage tanks at the ports are intact, and the oil fields are ready to be pumped by local oil workers, according to oil experts.
“It’s only a question of flipping switches,” said Michael C. Lynch, president of Strategic Energy and Economic Research, a consultancy firm.
Details of the dealings between the rebels and the Qataris remain unclear, but several oil industry experts said the Qataris or the United Nations could place money from any Libyan oil sales in an escrow fund that would later reimburse Italian, French, Spanish and American oil companies that have investments in the Libyan oil fields. Those companies include Eni, Repsol, Total and Occidental Petroleum.
“The companies’ attitude may be ‘Don’t worry, we’ll settle up later,’ ” said Mr. Lynch, who has broad experience in international oil markets. “This is a good way for the companies to get on the rebels’ good side.”
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