Courtesy Reuters

When the unrest in Libya began this spring, international oil companies and their foreign personnel fled the country. Libya's oil exports ground to a halt, removing approximately 1.6 million barrels per day of light, sweet crude -- low-sulfur oil that is more easily transformed into high-value products like gasoline and diesel -- from global oil markets. The West Texas Intermediate crude oil price inched up to the $80 per barrel level in mid-February, increasing to $86 per barrel by early April, but the Brent crude index, against which Libya's light, sweet crude is generally priced -- surged from around $95 per barrel in the winter of 2010 to over $110 per barrel in late February. It topped $120 per barrel in April.

Libya's oil production is modest in total, but it plays a huge role in the world's supply of high-quality crude. (Of the estimated 12.5 million barrels produced per day, African countries account for 42 percent. Of the African producers, Libya has one of the largest shares.) Global demand for light, sweet crude is growing -- especially in emerging markets, where it is used for transportation fuel and as an alternative source for power generation. The return of Libyan crude to oil markets should ease oil prices, particularly for Brent crude.

This could happen sooner than expected. The end of the conflict in Libya is in sight. The rebel movement, the National Transitional Council, has captured Tripoli and is preparing to establish a new government. Oil revenues will be crucial for the NTC, so the leadership will try to get wells flowing as soon as possible. Before the conflict, such revenue accounted for almost all of Libya's export earnings and a quarter of its GDP. Without it, the new government will be harder pressed to resume basic services or reconstruct the country's damaged infrastructure, even as a supportive international community unfreezes Libya's sizable foreign assets.

Getting Libyan crude oil back to market will not be easy, however. Security, law and order, and political stability must be ensured before international companies return. The NTC has largely pacified Tripoli, but there is continued resistance in Muammar al-Qaddafi's hometown of Sirte and in areas bordering Tunisia. Although Libya's tribes and factions came together to rise up against Qaddafi, they could fracture after the fighting is over, leading to renewed bloodshed. Indeed, there are already tensions. In July, Abdel Fatah Younes, a rebel commander, was assassinated, supposedly by another rebel faction.

On the technical side of resuming operations, even where oil fields and facilities were relatively untouched there remains the danger of mines, which Qaddafi's forces laid around the rigs as they retreated. Less concerning, but still cause for delay, is the physical deterioration of the wells, which have been neglected for months now. For instance, electrical submersible pumps that sit at the bottom of wells deep underground must be lifted to the surface and cleaned regularly, which is especially important in Libyan wells, given the waxier nature of the crude there. Having been left offline for months, certain wells could require significant workovers before production can be restarted.

Before the conflict, Libya's crude oil came from three main sites -- the Sirte, Murzuk, and Pelagian basins. The Sirte basin, located in eastern Libya, accounted for two-thirds of the country's crude output. Agoco, a subsidiary of the national oil company, was producing around 450,000 barrels per day in total before the fighting broke out, a significant proportion of which -- some 250,000 barrels per day -- came from the Sarir and Misla fields in the Sirte basin. The fields in the Sirte basin are among Libya's oldest and most geologically complex, but they could also be the soonest to come back online. Rebel forces have already repaired the damaged facilities and pipelines at those fields, and could begin exporting oil again as early as mid-September.

The Murzuk basin in the southwest consists of newer, less complex oil fields. The fields there are not believed to have sustained much damage, but rebel forces cut the pipeline between them and the Azzawiya refinery close to Tripoli in late June to deprive Qaddafi's forces of gasoline. Until the pipeline damage is assessed and repaired, the light, sweet crude output from the fields in the Murzuk basin (over 400,000 barrels per day prior to the conflict) will be trapped there.

The Pelagian Shelf basin, off the coast of Tripoli, was spared from the fighting, so operations there could resume fairly quickly. And these fields export oil via tanker, so their output would be readily available. However, both fields produce heavier, sourer crude, akin to Saudi Arabia's. High in sulfur, this oil is harder and more costly to refine into high-value fuels such as gasoline and diesel fuel, and its return to market should put less downward pressure on Brent oil prices than lighter, sweeter crude.

Although many details remain unresolved, the NTC has already declared that Libya will honor its existing oil production contracts with international companies. For their part, the international oil companies have made encouraging noises about how quickly they could resume production. Eni, which produced some 270,000 barrels of oil per day total in Libya before the fighting, has suggested that it could restart operations quickly at its offshore facilities in the Pelagian Shelf basin and that it could reopen its onshore facilities in a matter of months, depending on damage assessments.

Eni has been particularly proactive in building ties with the NTC, agreeing to provide gasoline and diesel for early reconstruction efforts, as well as fuel, medical, and technical supplies, in return for payment in crude later on. Among the other European companies, the German firm Wintershall (producing 100,000 barrels per day before the conflict) and the Spanish firm Repsol (producing 350,000 barrels per day before the conflict) have also suggested that their operations could be restarted in a matter of weeks.

Some observers have noted that Brazil, China, and Russia -- who are keen to develop the country's oil resources -- might have a harder time convincing the NTC to allow them back into the country, due to their lackluster support for the rebels during the conflict. If these countries offer the NTC reconstruction support, however, it could offset the NTC's unease. But Gazprom initially did the opposite, stating that it would not return until a "legitimate" regime governed the country. Since then, however, the company has made the conciliatory gesture of providing a shipment of gasoil to the rebels, and Russia has given diplomatic recognition to the NTC.

A prudent assessment of the various statements made by Libya's national oil company and foreign companies suggests that the country could be producing 400,000 barrels per day by early 2012, and upward of 800,000 barrels per day by the end of 2012. A return to full production levels as seen before the civil war could take 12 to 18 months. However, a quicker rebound in Libyan supply in the near term would put downward pressure on Brent crude prices, should help reduce the spreads between sweet and sour prices, and could perhaps even reduce the spread between the West Texas Intermediate and Brent prices. This could be a welcome relief for consumers in a sputtering global economy, and could help ease inflation in emerging markets like China.

Domestically, the NTC's legitimacy will depend on how it manages oil revenues moving forward. Under Qaddafi, Libya's vast oil wealth did not reach the majority of citizens. This was one of the underlying drivers of unrest this spring. As Libyan crude returns to the market, there are grounds for cautious optimism that the NTC will use its revenues for much needed post-conflict reconstruction. At the moment, such a move would benefit everyone.