Libyan chaos stirs global panic over oil supplies

By Alan Clendenning

Associated Press

Published: Sunday, Feb. 27 2011 12:00 a.m. MST

A Libyan oil worker, works at a refinery inside the Brega oil complex, in Brega east of Libya, on Saturday Feb. 26, 2011. Production at Brega has dropped by almost 90 percent amid the country's crisis because many employees have fled and few ships are coming to offload the product.

Hussein Malla, Associated Press

MADRID — Libya's oil industry is in chaos, and that's no exaggeration.

Armed men loot equipment from oil field installations. British commandos execute secret raids in the Libyan desert to rescue stranded oil workers as security disintegrates rapidly in remote camps.

Libyan port workers, frightened of being caught up in Moammar Gadhafi's violent crackdown on protesters, fail to show up for work, leaving empty tankers floating around the Mediterranean Sea waiting to load crude.

And the European oil companies extracting Libya's black gold are operating in crisis mode, trying to get stranded expatriate workers out and safe amid conflicting information on how much oil is still being pumped and just where it all is.

That was just this week. The situation may not get better in the near future.

No one knows whether Gadhafi or the rebels trying to oust him will end up controlling Africa's biggest oil reserves. Fears abound that Libya could turn into a fractured nation with competing armed groups ruling over rich and remote desert fields lying hundreds of miles (kilometers) apart from each other.

The chaos in Libya as it descends into virtual civil war has sent international oil prices skyrocketing despite a pledge from Saudi Arabia, the world's largest oil exporter, to ramp up exports. And that volatility is likely to continue, because it could take weeks or even months for Libyan production and exports to return to normal levels, experts said.

That has sent already over-caffinated oil traders into a frenzy that won't calm down until there's more clarity about what is happening on the ground in Libya.

The International Energy Agency reported late Friday that Libya is probably still producing about 850,000 barrels of oil daily, down from its normal capacity of 1.6 million barrels — but acknowledged the estimate is based on "incomplete, conflicting information."

Libya produces just under 2 percent of the world's oil, but its customers are overwhelmingly European. Hardest hit by the sudden oil shortage are European refiners that receive 85 percent of Libya's exports, turning the country's highly valued crude into diesel and jet fuel.

The biggest buyers are Italy, France, Germany and Spain — and Spain is so concerned it announced Friday that highway speed limits will be reduced in March in a desperate bid to cut fuel consumption.

The biggest problem facing oil companies and European consumers who depend on Libyan oil is a near-complete breakdown in solid information. Phones in Libya rarely work, Internet is intermittent, workers are fleeing and looters are grabbing what they can or pose a threat until order is restored.

While British military planes staged a daring desert rescue Saturday of 150 oil workers, hundreds of other workers were heading across the Sahara Desert in bus convoys toward the Egyptian border — a grueling trip.

One evacuee said the military plane he boarded in Libya was supposed to carry around 65 people, but quickly grew to double that.

"It was very cramped but we were just glad to be out of there," Patrick Eyles, a 43-year-old Briton, said at Malta International Airport.

Spain's Repsol-YPF oil company announced Tuesday it had suspended operations in Libya, only to find out a day later that the oil fields it operates with other firms were still producing 160,000 barrels of crude daily. Still, that was less than half of the 360,000 barrels produced before the crisis began.

Despite reports that production was still under way in the vast Saharan desert Amal fields, Libyans never before permitted to approach the oil fields under Gadhafi's reign showed up armed and took anything they could — four-wheel drive vehicles, pumps, generators. One group came with a trailer and tried to remove a huge crane, said Gavin de Salis, chairman of Britain's OPS international oil field services company.

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