* Estimated $50 billion of oil for sale
* Rival militias, civil unrest still worry investors
* Traders complain of weak margins on Libya's oil
By Emma Farge and Jessica Donati
GENEVA/LONDON, Nov 26 A year after oil firms
jockeyed to secure the first deals in post-war Libya, political
disorder and a large surplus of oil in Europe have sapped
enthusiasm ahead of talks this week for 2013 contracts worth
around $50 billion.
More than a year has passed since the ousters of Muammar
Gaddafi took control of the OPEC country, and while oil output
has risen back to pre-war levels of 1.6 million barrels per day,
unrest still disrupt shipments and work at refineries.
Protests and strikes cause expensive delays, while the
continued presence of guns and rocket-propelled grenades in the
capital is a concern for investors.
"The political instability and security problems make it
less attractive for the international oil companies and for the
traders as well," said Charles Gurdon, managing director of
Menas Associates, a political risk consultancy.
Libya's national congress appointed Abdelbari al-Arusi as
oil minister earlier this month, although it is unclear how
responsibilities will be shared with the National Oil
Corporation (NOC), which currently oversees oil sales.
Complicating the talks is the fact that sweet, high-quality
crude that Libya produces is increasingly difficult to sell.
Global supply of similar, sweet grades is increasingly
abundant because of the U.S. shale oil boom, while at the same
time, demand is falling because of closures at European plants,
some specially designed to process Libyan crude.
Last November, major traders such as Vitol and Glencore made
their debut in talks with Africa's third largest producer, vying
alongside established clients such as Italy's Eni for
deals in a departure from policies under Gaddafi.
Together, trading houses won close to 10 percent of Libyan
oil exports in 2012, while Italian, French and Spanish refiners
were given priority access to crude.
Now, oil firms gathering in Istanbul for the talks say the
premium once sought for Libyan oil is no longer justified as the
world is structurally short of sour not sweet crude.
"People have struggled. The future is clearly sour and they
will have to adjust lower their selling prices," said a crude
oil trader with a large independent trading house.
At some point this year, Libya set official prices so much
higher than rival Kazakh CPC or Algeria's Saharan grades that
buyers steeply cut purchases. That contributed to the country's
output fall by 300,000 bpd and prompted crisis talks between the
NOC and clients.
High prices have especially hurt oil traders with no
refineries as they need to seek an extra margin in arbitraging
tankers between producers and consumers.
Official prices have since fallen but Gurdon said there may
be ongoing political pressure for Libya's oil chiefs to keep
prices high, as the hydrocarbons sector accounts for around 90
percent of government revenue, according to a 2012 IMF report.
"It's very difficult to tell people after a revolution when
there's a lot of resource nationalism that they need to give
better terms to foreign companies," he said.
Industry sources have also complained that transparency on
oil contracts had worsened after the NOC stopped releasing
details of price and volumes on its website earlier this year.
NOC chairman Nuri Berruien said this month that it aimed to
sell most of its oil via term contracts but would resort to spot
sales if there was not enough interest.
Berruien did not give exact export figures for 2013 but
Reuters calculations suggest availability of at least 1.3
million bpd based on NOC production targets for the first
quarter minus refining capacity.
"The market is going to be open to everybody who is a
credible buyer," Berruien said, indicating that trading houses
were again welcome to compete for contracts.
Traders also complain that some of the problems that
complicated deals last year, including a lack of clarity on whom
to approach and what exactly is being sold, remain unresolved.
This has created a lack of trust between parties and the
perception that some oil firms may be favoured above others.
For instance, on fuel imports, with contracts for over three
million tonnes of gasoline to be purchased by the Libyans in
2013, traders complain that some firms have been approached
first and others excluded.
"Trading houses will be excluded unless they have a term
contract with a refinery," said a gasoline trader. "Saras,
Litasco, Eni (all Italian refiners) and the Greeks are the
favourites to win the contracts."
The talks will be led by NOC marketing representatives Ahmed
Shawki and Naima Suani, trade sources said. Libyan officials
said the purchase of over a billion dollars' worth of gasoline
had not yet been discussed with any company.
But a second gasoline trader said that the supply of
products was on the agenda, and that he had been told gasoline
deals would be discussed at the Istanbul talks.
Despite complaints from traders, the oil talks in Istanbul
are expected to be attended as widely as the previous year with
Eni, Petrochina, Vitol and BB Energy all due in.
And Libya's biggest trading partners, such as Eni, are keen
to display their commitment.
"Eni is committed to Libya, which is one of the countries we
view as strategic," a spokeswoman for Eni said ahead of talks.