Tripoli: Regardless of what comes next in Libya's lethal political standoff, the Organisation of the Petroleum Exporting Countries (Opec) country's oil sector is nearly certain to suffer, bringing long-lasting supply disruptions or even permanent damage.
Oil was higher in Asian trade on Wednesday due to the ongoing unrest in the Arab world, with the leader of major crude exporter Libya warning he would stamp out anti-government protesters.
New York's main contract, light sweet crude for April delivery, rose 11 cents to $95.53 (Dh351.5) per barrel in the afternoon and Brent North Sea crude for April was up 69 cents at $106.47.
The unrest in the key oil-producing Middle East and North African region which includes Libya, Bahrain, Yemen and Iran - all of which have seen uprisings - has stoked fears of disruption to supplies, analysts said.
Libya, which has Africa's largest oil reserves and is the continent's fourth largest producer, is a member of the Opec, which ships about 40 percent of the world's crude.
Potential outcomes
None of several potential outcomes is benign for Libya's oil industry - the lifeblood of its economy - or for oil prices.
The scenarios run the gamut from all-out civil war and attacks on energy infrastructure to low-level neglect and reservoir damage, as foreign expertise flees the country.
Over decades, from Iran, to Iraq and Venezuela, periods of political chaos in Opec countries have usually carved lasting scars on the oil sector, and few expect Libya to be any different.
"A period of chaos will probably interrupt Libya's refining and oil operations," said Amy Jaffe, an energy studies fellow and Middle East expert at Rice University in Houston.
"The military is abandoning Gaddafi, so it's unclear who is left to protect oil installations. Lots of foreigners are being evacuated, so who will remain in place capable of operating Libya's oil industry? Will workers even show up?"
As Africa's No. 3 producer and the site of the continent's largest proved reserves, estimated at 44 billion barrels, Libyan oil usually accounts for 2 per cent of world output.
The country, whose oil accounts for a fourth of Italy's demand, is the first major oil exporter to be thrust into acute turmoil since protests began sweeping through the Middle East in January, unseating presidents in Tunisia and Egypt so far.
An estimated 300,000 barrels per day (bpd) of Libya's 1.6 million bpd of production has been halted, as companies evacuate staff and suspend operations.
Much of the country's oil industry is run by foreign firms including Eni and Repsol, while Libya's National Oil Corporation (NOC) has traditionally been tightly controlled by Gaddafi.
Libyan strongman Muammar Gaddafi defiantly pledged on Tuesday to stay in power at any cost, threatening to have protesters hunted down and killed "house by house." With rival factions already laying claim to an oil-rich swath of eastern Libya, separated by hundreds of miles of desert from capital Tripoli in the west, the country could even face civil war, analysts warned.?
Years to bounce back
In Opec countries where oil infrastructure is the ultimate key to power and pursestrings, war and other major political crises have typically resulted in supply disruptions that take years or decades to bounce back from.
Iran's 1979 revolution cut the country's output by more than half, and production never recovered fully. Iraq's 1990 invasion of Kuwait ultimately slashed output in both countries for years, and ravaged Kuwaiti oil wells.
Venezuela's massive oil industry strike of 2002 crippled production, which has never returned to pre-strike levels.
To be sure, Opec's top producer Saudi Arabia has stepped in to boost production in previous disruptions in other member producers, and the Saudi oil minister said on Tuesday the cartel, led by the kingdom, stands ready to pump more oil, but only when needed.
US officials say Saudi Arabia could replace Libyan supplies within a month, although it would leave less available spare capacity.
Libya's unrest helped push US oil futures up 8.5 per cent on Tuesday to a 2-1/2-year high, although the surge also reflects the chance that chaos will affect other oil-exporting countries.
"The output of (Libya's) oil will probably not be completely halted, but it is difficult to see this level of chaos failing to result in significant operational disruptions," Eurasia Group analysts said in a note on Tuesday.
"It is likely that the country will experience a prolonged period of violent instability, with a potential for full blown civil war."
As the revolt aimed at ending Gaddafi's 41-year rule intensifies, oil infrastructure could enter the power play. Unlike in major African exporters Nigeria and Angola where oil is mostly offshore, installations are mostly on land in Libya, making them potentially more vulnerable.
"This effectively gives the country two political factions, two energy-producing basins, two oil output infrastructures. Economically at least, the seeds of protracted conflict - regardless of what happens with Gaddafi or any political changes after he departs - have already been sown," said political risk consultancy Stratfor.
With oil companies scrambling to pull personnel from the country, Libya's oil industry "will have to operate under difficult circumstances. A sustained lack of security will keep foreign oil companies at bay for a while," said energy consultancy PFC in a note.
As yet, there are no reports of attacks on energy infrastructure, but eastern tribal leaders have threatened to shut off exports, revenue from which usually flows to capital Tripoli, Gaddafi's increasingly tenuous stronghold in the west.
Nearby, an underwater gas line to Italy has already been interrupted.
The fact that Libya is cutting exports of refined products may indicate workers are already abandoning the country's refineries and their highly explosive plants out of fear.
A Time Magazine intelligence columnist wrote on Tuesday that Gaddafi himself may be ordering sabotage attacks on oil pipelines leading to the Mediterranean Sea, citing a source in the region.
At Libyan oil wells, which are mostly in remote desert areas, any abrupt halt could permanently damage infrastructure and compromise it for years.
"Anybody who feels they could still control the infrastructure in the future will probably not try to blow it up," said Jaffe.
"But companies, including the Libyan national oil company, may face a tough decision. Will they try for orderly shutdowns that ensure production can resume easily later, or keep fields going but risk events that could damage them?"
With inputs from agencies.
