So, was this a war for oil?

Terry Macalister

The dust in Libya has not yet settled, but already the struggle has begun over who gets what.

The Libyan conflict has been a war about oil if not “for” oil. The country's economy is almost totally dependent on hydrocarbons and a key objective for the transitional government will be to get the wells up and running again as soon as possible.

The British and French, meanwhile, are worried about future energy supplies. They are already pushing and shoving over who should get what of the energy proceeds before the political dust has even settled in Tripoli (just as BP and Shell are once again sitting pretty in Iraq following western military intervention there).

The U.K. government has been working hand in glove with parts of the oil industry to bring about regime change in Libya. London crude trader, Vitol, held meetings with Britain's International Development Minister Alan Duncan (a former consultant to the firm) and played a key role in keeping the rebels well-supplied with petrol while others tried to starve Muammar Qadhafi's troops of fuel. Was this a practical operation to undermine Qadhafi's military logistics or a potent symbol that western politics and oil are so closely intermeshed that the agendas of both are indistinguishable? Certainly the French blew the gaff on Thursday. Foreign minister Alain Juppe was trying to bury a story run in Liberation that suggested that Paris had tied up an agreement to be given 35 per cent of all the country's oil in future in return for military help. He said it was “fair and logical” to him that Libya's new interim government, the National Transitional Council would turn to France in the reconstruction of Libya.

The British have not been so public about their expectations but we know that BP has already held talks with the new opposition leaders and are preparing to re-enter the country. Clearly, the role of Vitol, never mind the RAF jets, will require some recognition in the new Libya that emerges — at least in the eyes of the U.K. political and oil establishment.

And the prospects look good. An executive from the rebel oil company, Agoco, has already said the interests of Britain, France and Italy will all be treated favourably compared with those who equivocated, such as Russia and China.

But won't the NTC want to reorganise its oil industry differently, and perhaps do without the West completely? Qadhafi originally kicked out western oil but then invited it back in after U.N. sanctions over the Lockerbie bombing were lifted. The problem for the NTC is that oil provides virtually all of the country's income. Even if nationalisation was their preferred option, getting production back up and running as quickly as possible is the imperative. Libya used to produce 1.6m barrels of oil a day — worth an almighty $1.3bn a week at today's crude prices, and money the NTC desperately needs, even if it means sharing the spoils.

Tougher terms?

Whatever deal is reached, it is unlikely to be all or nothing: nationalisation or capitulation. What the new government will certainly want to do is exact much tougher terms for western oil company involvement. The idea that a third of Libya's oil would be simply turned over to the French, as the Liberation story suggested, is surely nonsense. It would be political suicide for the NTC.

What happened in Iraq is instructive. Although BP and others have been given access to reserves in Iraq, they are not on the terms they would ideally have chosen. The auctions there have resulted in “technical service agreements”, where the likes of BP act as contractors and get $2 on each barrel of oil produced but do not “own” the reserves in the way they do in the North Sea — or did in Iraq before they were removed by Saddam Hussein.

Western independent oil companies have the most modern technology, easy access to capital market money and a can-do spirit, but they are also on the defensive because they are being gradually muscled out globally by State-owned national oil companies in places such as Venezuela, Brazil and Russia.

The desperate — and now failed — recent attempt by BP to tie up a share-swap deal with Russian State-owned Rosneft, despite all the problems it has had in that country, was just another sign of this.

With the North Sea and other mature basins fast running out of oil and a failure to fully invest in lower carbon alternatives, western ministers are also desperately worried about future crude supplies.

It was a war around oil in Libya — but the new interim government in Tripoli could yet win that, too. (Terry Macalister is the Guardian's Energy Editor.) — © Guardian Newspapers Limited, 2011