Eric Watkins
Oil Diplomacy Editor
Libyan rebels said they took control of the 120,000 b/d oil refinery in the western town of Zawiyah even as additional supplies of imported oil products are now reaching other rebel-held areas of the country.
"We have full control over the Zawiya refinery, and we have liberated the whole city except two main streets," said one rebel leader. Another said the plant was shut but that it showed no signs of serious damage.
"The battle lasted for 2 days but the main battle was last night. We took control last night," said another rebel fighter, who added that the rebels fought 150 troops loyal to Libya's embattled leader Moammar Gadhafi.
The capture of the 120,000 b/d refinery is considered by some more of a symbolic coup for the rebels as the flow of crude from fields in the southwest of Libya has largely been halted since midsummer.
The refinery was believed to be running at about one third of its normal capacity, drawing mainly on oil that was in its storage tanks. Zawiya mostly produced fuel oil, not gasoline.
However, a rebel commander said that a pipeline linking the refinery to Tripoli was severed on Aug. 17, representing a major blow to the Gadhafi regime.
"That would imply dire consequences for the population in Tripoli in terms of fuel supplies needed for the city to keep operating," said Fernando Calado of the International Organisation for Migration.
Libya's Prime Minister Al-Baghdadi Ali Al-Mahmoudi denied that the refinery was in rebel hands and called for a ceasefire.
Meanwhile, Libya's opposition is scheduled to receive two more shipments of oil products, further strengthening the rebels as they gain new momentum in their war against the Gadhafi regime.
A tanker carrying 22,000 tons of fuel oil delivered by UK oil trading house BB Energy Trading Ltd. is said to be on its way to the rebels' capital of Benghazi.
Another tanker delivering 14,000 tons of diesel on behalf of Turkey has already arrived in Benghazi, representing the second fuel shipment from Istanbul in 2 months.
Despite reports of limited damage at Zawiya and other locations across the country, an oil analyst said it will take Libya at least 3 years to get oil production back to prewar levels.
Ross Cassidy of Wood Mackenzie Ltd. said technical and security challenges mean it is likely to be 36 months from the end of hostilities before Libya again pumps 1.6 million b/d of crude.
"They are not going to just turn production back on," he said. "Thirty-six months is quite an optimistic scenario."
Cassidy said Libya could probably produce about 600,000 b/d "relatively quickly," but that the North African country would need foreign expertise and investment to get production up to full speed.
"Substantial oil volumes could be back in the market by late 2012, if a resolution is achieved by the end of 2011. But the recovery period will extend if production remains shut in for longer, as infrastructure continues to deteriorate," Cassidy's report said.
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