Oil & Gas Industry: Libya, un-Surt-ainty and trouble ahead?

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Rig Writer
03/09/2011

It seems that the Arab world is in more turmoil than usual. Tempers are flaring, the "peasants" are revolting and the little people are clamouring for "change they can believe in".

The approbation of liberal-minded Western pluralists to Libya’s popular uprising is evident. The reaction of the oil market has been similarly blatant – only today calming from hitting its highest prices since 2008’s record breaking spike. Gold is still flitting around its record all-time high at a current $1420.

The markets are afraid of, and prompted by unpredictability, and the sudden fall from grace of the most stable despot in North Africa has filled the world with a trepidation that hasn’t been felt since the last Western-sponsored dictator began his descent in the sands of Iraq.

Beneath the sands of Libya lie four per cent on the world’s accessible oil reserves. As this is being written, rebels and Gaddafi loyalists are fighting for the control of Ras Lanuf, one of the country’s most important oil towns.

If opposition forces retain control of the municipality and its all-important topping and reforming oil refinery, then they have pledged to honour all contracts with the nations and organisations supplied by that facility.

Should Gaddafi’s troops wrest control of Ras Lanuf from the rebels, odds are that the opposite will happen. We all know that a cornered animal is the most vicious, and a burning oil well scenario á la Desert Storm is not immediately unfeasible. Without the beneficence of OPEC in this worst case scenario, oil prices could well be pushed to $200 and beyond.

The next few weeks will be crucial in determining the fate of Libya. If Gaddafi’s tribal capital of Surt falls into opposition hands, then the dictator’s powerbase will be dissolved and his position in jeopardy.

by Tim Haidar

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