European oil producers Eni SpA (E) and Repsol YFP SA (REP) Thursday said they've halved their output in Libya due to continuing unrest, as oil companies operating there have sent crude prices surging by shutting in production and removing workers.

Estimates differ on just how much of Libya's oil production has been removed from world oil markets. The International Energy Agency Thursday said it estimates the Libyan crisis has removed less than 1% of global production from the market, or between 500,000 and 750,000 barrels per day of crude oil. Yet Paolo Scaroni, chief executive of Eni--the international energy company with the biggest operations in the hydrocarbon-rich North African country--estimated Libya's oil output has dropped as much as 75%.

They agree, however, that oil producers and consumers can deal with the lost supply if the disruption doesn't spread to other key oil-exporting nations in the crucial Middle East and North Africa region.

"There are 1.2 million barrels of oil less [in the markets per day], which isn't really a lot," said Scaroni at a conference in Rome. "There's a degree of general uncertainty, and this acts as a trigger for speculation."

Libya's total daily oil output was about 1.6 million barrels before a revolt led to widespread chaos and violence, prompting foreign oil companies to withdraw workers from the country.

The violent clashes and concerns about disrupted Libyan oil production Thursday lifted international benchmark Brent crude prices to their highest levels in more than two years. Brent futures soared to an intraday high of nearly $120 a barrel in volatile trading. They recently traded around $111.50 a barrel, after the IEA reassured the market about its ability to deal with a shortfall.

Uncertainty over precisely how much output is affected by the upheaval fueled speculation that there might not be adequate spare production capacity to meet possible further supply disruptions in the region.

The IEA, however, said it could adequately compensate for a potential shortfall of oil supplies. It's prepared to release its emergency oil stockpiles, which can cover up to 145 days of IEA members' imports. The IEA's industrialized nations have 1.6 billion barrels of emergency oil stocks available, said the agency.

Spain's Repsol YPF Thursday said it is managing to maintain production at its Libyan oilfields at around 50% of capacity, despite the clashes.

Oil companies such as France's Total SA (TOT) and Germany's Wintershall have shut down operations and begun flying staff to safety, after violent clashes between forces loyal to Col. Moammar Gadhafi and protesters led to hundreds of deaths.

Gadhafi's forces maintain control over most of western Libya, while his opponents hold the eastern side.

"It's difficult to talk to Libya these days," Repsol's Chairman Antonio Brufau said. "There is confusion, no question about it."

Eni isn't in contact with the Libyan government, and its only link with Gadhafi's representatives is with Tripoli's ambassador in Rome, Scaroni said.

Eni has been present in Libya since 1959, or a decade before Gadhafi seized power in a military coup. Output from Libya represents about 14% of Eni's total hydrocarbon production.

The upheaval in Libya has led Eni to shut in more than 50% of its output from the country, said Scaroni. Eni's current Libyan production is 120,000 out of the usual 280,000 barrels of oil equivalent a day, he said.

Tuesday, Eni shut down the Greenstream natural gas pipeline from Libya that supplies Italy with more than 10% of its needs.

Prolonged political unrest or a more hostile environment to foreign investment in the Middle East and North Africa could negatively affect the credit ratings of several European oil companies, Fitch Ratings said Thursday.

Refiners have brushed aside concerns about potential supply trouble, as long as the unrest doesn't spread to other producing countries.

If the output drop remains "limited to Libya, there are plenty of [supply] alternatives," said Chief Executive Alessandro Garrone of ERG SpA (ERG.MI), Italy's biggest independent refiner by capacity, Thursday in Rome.

Top oil exporter Saudi Arabia is in active talks with European refiners to replace any shortage of Libyan oil supplies, a senior Saudi oil official said Thursday, in an attempt to reassure markets that the world's biggest oil exporter can offset lost crude.

Exporting Libyan oil is also becoming a challenge as some ports are closed due to the clashes and as storage space fills up in those ports where ships can't funnel the fuel.

In the meantime, Eni's CEO said he hopes to have a "clearer picture of the overall political situation" when the company presents its new strategy plan on March 10.

Eni website: http://www.eni.it

-By Liam Moloney, Dow Jones Newswires; +39 06 6976 6924; liam.moloney@dowjones.com

(Carlo Renda and Daria of MF-DJ, Summer Said in Dubai and David Roman in Madrid contributed to this article.)
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