Published: 28 March, 2011
Qatar has become the first Arab country to recognise Libya’s rebel national council as the representative of the North African nation, easing the way for the opposition to profit from oil sales on global markets.
Over the past two days, rebels have seized control of the bulk of Libya’s oil industry – including the country’s largest oilfields in the so-called Sirte basin and the main terminals – as they have pushed back Muammer Gaddafi’s forces with the assistance of Nato air strikes.
A Libyan opposition leader said that Qatar had also agreed to sell oil on its behalf in international markets – although Qatari officials were on Monday unavailable to comment on any such deal. But Washington made clear that opposition oil sales need not be subject to the sanctions imposed on Libya.
However, US Treasury officials cautioned that the rebels would have to create a payment mechanism that did not involve the Gaddafi-controlled National Oil Company, the central bank or any other government institutions.
The Qatari news agency said that the national council, which until now has only been recognised by France, had “practically become the representative of Libya and its people”.
Interactive: The fighting in Libya
The current situation in the fighting between opposition fighters and forces loyal to Col Muammer Gaddafi
Doha is already providing an economic lifeline to the rebels, supplying them with petrol, diesel and cooking gas and helping to avert a fuel crisis.
Libya’s oil production has dropped to a trickle from a pre-crisis level of 1.6m barrels a day, triggering a price rally in global oil markets and forcing Saudi Arabia, the world’s largest oil exporter, to boost its production to offset the shortfall.
Opposition officials said they could boost production to about 400,000 b/d. At current prices of $115 per barrel, the exports would be worth $1.4bn a month.
Ali Tarhouni, a rebel official in charge of economic and oil matters, said Libya’s opposition could return to the global market within weeks. “We contacted the oil company of Qatar and thankfully they agreed to take all the oil that we wish to export and market this oil for us,” he told reporters in Benghazi.
But Lawrence Eagles, head of oil research at JPMorgan, said there were still significant “operational constraints” for the return of Libyan oil exports.
“Although fighting in and around the key export infrastructure has diminished, as opposition forces continue to make gains, it remains far from clear as to the operational readiness of vessels to dock at Libyan ports and the status of onshore facilities to load oil,” he said.
Western oil traders are unlikely to start buying oil from the rebels as soon as the legality of the move becomes clear, analysts said. Moreover, some of the largest buyers of Libyan oil, including Eni of Italy, Total of France and Repsol YPF of Spain, have operations in both the rebel-controlled east and the Gaddafi regime-controlled west, potentially deterring them from buying the rebels’ crude.
But developing nations such as China and India, which in the past had bought Libyan oil in relatively large quantities, could move faster, analysts said.
Foreign ministers from 35 countries will meet in London Tuesday to discuss Libya’s future amid hopes that the African Union will provide Col Gaddafi with an exit from Libya by offering asylum.