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Restoring infrastructure, production
This urgent need to resume production has to overcome the unspecified destruction of the country's oil infrastructure. Oil wells need constant maintenance, and after 6 months of stoppage facilities could have suffered considerable damage.
Libya has six main terminals, and at least two of them, Es Sider and Marsa el Brega, were heavily damaged.13
Despite the focus on oil exploration and development, Libya has massive untapped natural gas resources. The country became a gas exporter in 1971, when a liquefaction plant at Marsa el Brega became operational.
After early pricing disputes, exports built up to a peak of 3.6 bcm in 1977, but in 1980 the government nationalized the facilities from Esso (now ExxonMobil) and imposed higher prices.14 The main buyers of the facility's LNG either cancelled their contracts or scaled down their purchases.
For the next 2 decades the development of the industry had been slow partly because of economic sanctions and partly because of official lack of interest.
In the early 2000s, however, the gas industry experienced a revival. The subsea Green Stream Pipeline connecting Libya and Italy was inaugurated in October 2004. This 340-mile pipeline is a joint venture of Eni and the National Oil Corp. of Libya.15
Eni closed the pipeline in February 2011 when the violence erupted but reopened it late in the year. The resumption of gas exports is a major step.
More important is the return of Libya's full oil production and export. Several major international companies such as Eni, Repsol of Spain, Total of France, Wintershall of Germany, and US-based Occidental Petroleum, ConocoPhillips, Hess, and Marathon have already expressed interest in resuming operations in Libya, and some have sent representatives to negotiate their return. It is unclear when Libya's production will reach the precrisis level.
Analysts have speculated on how long it will take the new Libyan authority to repair the damage in the oil infrastructure. The experience in other major producers who went through political upheavals underscores that political stability, improved security, along with stable legal and institutional framework are prerequisites.
The examples of Iran, Kuwait, Russia, Nigeria, and Iraq suggest that Libya might need 3-4 years to restore production to the precrisis level.16 The interim government decided not to award new oil concessions or make major economic decisions, saving those for a future elected leadership.17
The technical and political challenges facing the Libyan authorities are immense. They have to repair the damaged oil fields, terminals, and other installations. Equally important, they have to create new political institutions, security forces, viable bureaucracy, and agree on constitution.
Unlike Egypt and Tunisia, who inherited these institutions, the new Libyan authority has to start from scratch.18 On the positive side even after a long and costly civil war, the Libyan authority has inherited substantial financial assets. In addition, IOCs are eager to invest in Libya's oil and gas sectors.
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