IHS World Markets Energy Perspective | |
Significance | The scent of Tunisia's successful Jasmine revolution continues to pervade the Arab region, with a limited specific impact on energy operations to date, but a number of disruptions that have now spread to the largest regional hydrocarbon producer affected so far, the Libyan Arab Jamahiriya. |
Implications | International oil prices have risen by at least USD2/barrel on the threat of disruptions to Libya's 1.58 million b/d of oil production, although as yet only the Nafoora oilfield is reported to have been affected by strikes rather than sabotage. Of more consequence, oil flows have been identified as a target by the Zuwayya tribe, which has threatened to disrupt supplies in the next 24 hours if the regime continues its violent repression of civil unrest. |
Outlook | The ongoing violence is likely to make itself felt in disruption to the movement of personnel and goods in the energy sector and elsewhere, with some potential short-term implications for payment delays by state players; upstream facilities have traditionally been well secured, although their ongoing integrity depends to an extent on the affiliations of security personnel as the uprising continues to gather momentum, with downstream and transportation structure likely to be far more vulnerable to attack. |
Tripoli Turmoil
After over five days of violence and crackdowns in the relatively poor regions of Libya's east, including the second city of Benghazi, civil unrest has now spread to the capital, Tripoli, resulting in tangible responses by foreign investors as they seek to remove non-essential personnel from the country, including those in the oil sector.
As of mid-Monday morning, the withdrawal of non-essential personnel was reported by OMV, Statoil, BP and Wintershall (see table). No significant impact to the country's 1.58 million b/d of oil production has yet been reported, bar the shut-in of the Nafoora oilfield due to a workers strike, while gas exports through the 8-bcm Green Stream pipeline to Italy have continued uninterrupted. The potential remains strong, however, for temporary outages and localised impacts and the disruption of the internal distribution of products and supplies to both domestic and export markets. The beleaguered Qadhafi regime is also alleged to have made targeted electricity supply disruptions in Benghazi in retaliation for protests over the weekend (18-20 February).
The response to the crackdowns and the retaliatory action by Qadhafi's forces has so far only served to increase defiance and bring out the most credible and direct threat to energy supplies in the short history of current regional unrest, much of which has only affected energy operations indirectly (see Related Articles). The authorities reportedly foiled an attempt to set alight oil wells at the AGOCO-operated Sarir oilfield yesterday. That was followed up by threats from Sheikh Faraj al-Zuwayy who stated on al-Jazeera (reported by BBC monitoring) that he had been tasked by his Zuwayya tribe to tell Muammar al-Qadhafi and the European countries to stop the bloodshed or oil flows will be halted within 24 hours. "The blood of Libyans is more precious than oil", he said, also calling for Qadhafi to stand down. That call to stand down was also echoed by a leading figure in the Warfella tribe, which traditionally provides personnel for the local security forces.
In response, international oil prices on the Brent benchmark contract have rallied a further USD2/barrel to nearly USD104/barrel on the Libya unrest and continued unrest in other hydrocarbon producers through the region, including Bahrain, Yemen, and Algeria, as well as concern about the flow of supplies through the Suez Canal.
Libyan Energy Status, 1200 GMT February 21 2011 | ||
Event | Impact | Companies Affected |
General Unrest | Withdrawal of non-essential personnel and families. | BP, OMV, Statoil, Shell, JX, Wintershall. |
No impact on operations. | Eni, Total, Repsol | |
Oil Worker Strikes | Nafoora oilfield stopped production. | NOC. |
Targeted Attack on Oil Wells at Sarir Oilfield | Buildings and administrative infrastructure damaged. Attempt on oil wells prevented. | NOC subsidiary AGOCO. |
Outlook and Implications
The tangible energy impacts of the regional Arab political reawakening have been limited so far, with Egyptian gas supplies to Jordan, Syria, Israel, and Lebanon the main outage to be reported so far, alongside delays to the movement of personnel and supplies across Egypt and Tunisia, which have led to some force majeures and delays to new exploration drilling. Further down the line, decision making on major projects and awards is also expected to be affected in these two states as new decision making structures and priorities are put in place.
Events in Libya have far more potential to affect energy supplies in the immediate time horizon, with widespread popular awareness that the Qadhafi regime is nearly wholly dependent on hydrocarbon exports for its revenue base. In 2010, hydrocarbon exports provided some USD46.3 billion of export revenues of USD47.8 billion in total. That dependence has brought with it significant security details to defend key facilities, the loyalty of which has so far been unquestioned. While upstream facilities are well defended, as are ports, midstream and downstream infrastructure have traditionally proven more difficult to secure, offering a potential target for any disruptions if the threats are carried forward. With the momentum still apparently building in attempts to overthrow the 42-year-old regime, the capacity for further disruptions remains high.
Related Articles
- Israel: 17 February 2011: Israel Activates Energy Alternatives As Egypt Gas Cut-Off Continues
- Middle East and North Africa: 15 February 2011: Egypt Gas Outages Mean Continued Pain Down the Line for Israel, Jordan, Syria and Lebanon
- Egypt: 9 February 2011: BG Restarts Drilling, Flies Workers Back, While Statoil Blames Egyptian Supply Woes for Continued Suspension
- Egypt: 2 February 2011: Protests and Curfew Start Disrupting Drilling, Port Operations, in Egypt
- Egypt: 31 January 2011: Rattled IOCs Evacuate Offices After Political Unrest, But Upstream Operations Continue in Egypt