Sitting on Africa's largest oil reserves, one can expect foreign oil companies to be beating a path to its door clamouring for contracts. But campaigners urged the National Transitional Council (NTC) to refrain from any new oil concessions until an elected government is in place to avoid perceptions of a Libyan "oil grab".
"Any deals at this time could raise concerns within Libya that international support for the NTC is driven by a desire for access to oil rather than for the benefit of the Libyan people," said campaigning group Global Witness. "The NTC is likely to have to honour Gaddafi-era contracts in order to get oil revenues flowing. But no new deals for the exploration or exploitation of oilfields should be considered until an elected government can review existing rules and laws to ensure robust transparency and accountability."
European firms have been active in Libya for years and US companies went in after sanctions were lifted in 2003, when Gaddafi agreed to dismantle his weapons of mass destruction. Chinese companies have also made big investments, although China Oilfield Services has had to write down the value of its assets there by 41.8bn yuan ($6.3bn) because of the unrest.
BP, a key player, returned to Libya in 2007 with a large exploration project, more than three decades after it was thrown out when Gaddafi nationalised the oil sector. The company was granted the right to explore for gas in offshore and onshore fields in a $900m deal. The agreement, which was signed during a trip by British businessmen accompanying former prime minister Tony Blair, paved the way for BP to drill 17 wells in the offshore Gulf of Sirte basin and the onshore Ghadames basin.
Oil reserves in Libya are the ninth largest in the world, with 41.5bn barrels as of 2007, hence the intense foreign commercial interest. Before conflict broke out in February, Libya's production of crude oil was about 1.6m barrels a day. With oil making up 80% of the country's revenues, pumping out oil will be crucial to Libya's reconstruction and recovery.
While it still is too early to say how much oil Libya could start producing and when, IHS, a consultancy, said Libya may be able to export as much as 1.2m barrels of oil a day within the next 12 months. Recovery, however, will depend on the NTC persuading oil workers – many of them from neighbouring countries – to return, and on speedy repairs to damaged pipelines, export facilities and damaged oilfields.
The TNC has said it is receiving help from Qatar Petroleum for a resumption of oil production and exports, and the reorganisation of Libya's National Oil Corporation (NOC). QP helped the rebels to market the few cargoes it managed to export from the eastern Marsa el-Harigh oil port and helped the rebels to import fuel to meet shortages in their territory.
"QP's support will be crucial in the short run, as the lifting of international sanctions sometimes can be a long-winded process and might initially negatively affect some of the Libyan operations," said IHS. "QP will also be able to advise on the reorganisation of the NOC and train new marketing personnel, given the inherent corruption in the former marketing organisation of the NOC and the extent it was used by the Gaddafi regime as a personal funding source."
Global Witness said Gaddafi's demise provided an opportunity for Libya to wipe the slate clean on the misuse of oil funds that helped Gaddafi maintain his 42-year-old rule.
"Libya currently stands at a crossroads in several senses – one of the best ways to ensure it takes the path of peace and prosperity is to bring transparency to its oil sector," said Brendan O'Donnell, senior oil campaigner at Global Witness. "By drawing a line under Gaddafi-era corruption and the mismanagement of public wealth, the NTC could champion resource justice in the transitional constitution and set a great precedent for Libya's future."
The group called for transparency provisions to be written into the transitional constitution that require public disclosure of how Libya manages its oil sector, and disclosure of all revenues associated with it. It also said terms of existing oil contracts should be disclosed, and details of agreements made by the NTC with governments and companies involving sovereign funds or the exchange of cash, crude oil or "IOUs" secured against frozen assets should be made public – and open to scrutiny.
"A transparently managed oil sector could prove the catalyst for much-needed development and stability in the country," said Global Witness. "But any perception that the rebels or Nato countries have their own designs on Libya's oil could stir further division and conflict."
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