Race is on for Libyan oil: Chinese, Russians could be left out

ENI expects business as usual with billions in signed contracts

There could be political fallout for countries that failed to support the Libyan rebellion, countries like China, Russia and Brazil. A spokesman for the Libyan oil firm AGOCO, said  "We don't have a problem with Western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil."

Those countries had opposed tough sanctions proposed by the US and other European countries against Ghaddafi. The comment by the AGOCO spokesman suggests that they could lose out on lucrative new oil contracts for failing to support the rebellion. Up to seventy-five Chinese companies operated in Libya before the war. Russian oil firms Gazprom Neft and Tatneft also had projects worth billions of dollars in Libya. "We have lost Libya completely," Aram Shegunts, director general of the Russia-Libya Business Council, told Reuters. "Our companies will lose everything there because NATO will prevent them from doing their business in Libya."

Meanwhile, Italian oil company ENI, Libya's biggest pre-war producer, saw its shares gain up to 7 per cent on Monday and the company has said that it expects a new government in Libya to honour contracts made under Ghaddafi. “Our contracts are protected by international law,” Chairman Giuseppe Recchi said in an interview in Rimini, Italy. An end to conflict will be “very positive” and allow output to resume, he said after rebel fighters stormed Tripoli.

ENI has committed to invest $26 billion over the next ten years in Libya. The company has been active in the country since 1959, more than a decade before the coup d'etat that brought Ghaddafi to power in 1970.

Officials from ENI have already arrived in the country to restart its oil facilities in eastern Libya. Libya produced about 2 per cent of global oil, 1.6 million barrels per day, and has reserves capable of sustaining that output for eighty years.

Libya's former top oil official, Shokri Ghanem, who defected from the government of Gaddafi in May, told Reuters some Libyan oil output would restart in a few months but it would take up to 18 months to return to pre-war levels. According to AGOCO, they are "technically" ready to restart oil output in two eastern oilfields with capacity of 250,000 barrels per day.