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09/01/2011 10:29 am ET | Updated Nov 01, 2011

Oil firms weigh sabotage and boobytrap risks in Libya

By Emma Farge

BENGHAZI, Libya (Reuters) - Benghazi's hotel lobbies are filled with bustling reporters and diplomats -- but there is no sign of the blackberry-wielding oil executives that big oil cities attract.

Posh restaurants are few and far between and trash is piling up on the streets of the city, Libya's de-facto oil capital while violence and shortages still plague Tripoli.

So far they have mostly stayed away and have not instructed site workers to return, settling instead for very fleeting visits on private jets to meet and greet Libya's new leaders.

But a careful study of the hotel lobbies also reveals private security workers hired as scouts for oil companies which are dithering over whether to return to the oil-rich North African state.

They are from private companies hired by oil firms to make a safety assessment in a city where battlewagons mounted with anti-aircraft guns still roam the streets and the sound of machinegun fire is regularly heard in the night.

Beyond Benghazi, one of the main concerns for international firms is damage to the oil terminals during the back-and-forth fighting along the Mediterranean coast over the last six months.

The front line has now moved beyond the major export terminals of Brega, Ras Lanuf and Es-Sider toward Gaddafi's hometown of Sirte, possibly within the range of a scud missile.

But perhaps even more worrying for international firms with is the risk of further sabotage attacks on facilities deep in the desert.

The Sirte Basin, which contains around 80 percent of Libya's proven reserves, in particular is seen as vulnerable since the fields are in remote parts of the Sahara desert where some areas are still not firmly under control of rebel forces.

Oil companies have good reason to worry. Production in eastern parts of the country ground to a halt after pro-Gaddafi forces attacked oil installations in the desert.

Benghazi-based oil firm the Arabian Gulf Oil Company (AGOCO) said 14 people were killed in two separate attacks on its infrastructure in the Sarir and Mesla fields.

"We are facing a different threat of military gangs from Gaddafi. We have to expect anything," said Mustafa el-Huni, an oil official within the government of the interim National Transitional Council (NTC).

"Nobody can guarantee that a missile won't hit Brega."

MINES AND BOOBYTRAPS

Even if rebel forces are successful in taking territory around Sirte, the risk of further damage to facilities and risk to staff will remain important considerations for oil majors like ConocoPhillips and Total with high standards of health and safety.

One of the biggest challenges is clearing the landmines laid by Gaddafi forces in the first few months of the war when they were driven back west toward Tripoli from the oil town of Brega in the east.

This conflict is not Libya's first experience with mines and the desert is still littered with those placed by Gaddafi troops to protect the country against possible invasion from United States', Chadian and Egyptian forces.

The Sirte Basin also still holds unexploded bombs from World War II, but oil companies were able to operate there with the help of security forces and the former Libyan army.

But the present conflict has brought new risks.

Russ Bedford, head of operations for Swedish company Countermine Operations working with the NOC on mine clearance said fresh minefields have been laid on the beaches around the Ras Lanuf oil export terminal and the Libya's largest refinery.

"They were put on the beach to prevent sea landings. We have been informed that it has been mined again," he said.

Boobytraps are another threat.

"The risk is that the facilities are booby-trapped. We know that they have that capability. They found mines with switches on them in one of the oil concessions."

OIL RESTARTS

While AGOCO and oil officials in the Libyan government say they can start initial production without foreign workers, the process of ramping up output is likely to depend on how quickly they return.

The speed of ramp-up will also partly determine the pace at which the cash-strapped National Transitional Council can be weaned off western financial aid.

Before the war, Libya pumped around 1.6 million barrels per day, most of which was exported. At current oil prices near $114, Libyan oil exports are worth around $148 million a day.

The National Oil Corporation's newly appointed chairman Nouri Berouin told Reuters this week that it would take up to 15 months to reach pre-war output levels, citing mines as a key problem.

"Once our fields are secure, we need to make sure we clear the mines. Building up output will require logistical support and we might need our foreign partners," he said.

But Africa's biggest oil reserves will be a strong lure.

The NTC said it has a force of 3,000 protecting the oil fields and will aim to add another 2,000. AGOCO said it has a "small army" in place in its eastern fields. Still, oil firms are not likely to give the green light to send in foreign workers until it is satisfied that this is enough.

Industry sources told Reuters that oil companies have offered the Libyan NOC assistance by providing their own security but there is so far little sign of these being accepted, with many politicians wary of possible political implications of a foreign security presence.

"Many companies are offering security but we have to study the strategic ideas of these companies," said el-Huni.

"We don't want foreign soldiers to be here."

(Editing by William Hardy)

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