Libyan July oil production dropped 29% MoM and halved over the previous year due to a civil war situation in the country. Furthermore, the country has closed all of its oil export terminals in the Eastern region, making the Mediterranean oil market very uncomfortable about prospects of output from Libya.
Oil production in Libya
Production in July 2013 averaged at 800,000 barrels per day (bpd). However, recent reports by Libyan local newspapers indicate that the output fell to as low as 600,000 bpd last week. This implies huge losses for the Libya, a country which has a capacity of 1.6 million bpd.
About two-thirds of Libyan oil production comes from fields in the eastern part of the country, where the majority of the civil unrest is concentrated. The protestors are blocking the coastal areas of Ras Lanuf in eastern Libya. The Sirte basin, one of the largest oil producing blocks in Libya is located in the same neighborhood and the situation is affecting all the companies operating in this area.
Figure 1: Map of Libyan Oil Infrastructure
Stakes in Sirte basin
ConocoPhillips (NYSE:COP), Marathon Oil Corporation (NYSE:MRO), Hess Corp. (NYSE:HES), Northrop Grumman Corporation (NYSE:NOC), Eni SpA (ADR) (NYSE:E) (BIT:ENI), Mellitah, Wintershall, Suncor Energy Inc. (NYSE:SU) (TSE:SU), Total SA (ADR) (NYSE:TOT), Mabruk, Statoil ASA(ADR) (NYSE:STO), Royal Dutch Shell plc (ADR) (NYSE:RDS.A) (NYSE:RDS.B), RWE AG (ADR) (OTCMKTS:RWEOY) (ETR:RWE) (FRA:RWE), Gazprom OAO (ADR) (OTCMKTS:OGZPY) (MCX:GAZP), Occidental Petroleum Corporation (NYSE:OXY) and OMV AG (ADR) (OTCMKTS:OMVKY) (FRA:OMV) (ETR:OMV) all have stakes in the Sirte basin. The production from Sirte basin is exported via the oil terminals around Ras Lanuf, which have been the primary focus of protestors.
Companies operating in the southwestern Murzuq Basin include OMV AG (ADR) (OTCMKTS:OMVKY) (FRA:OMV) (ETR:OMV), Total and Mabruk. These companies export oil via the Zawiya oil terminal. This terminal is located near the federal capital of Tripoli and remained safe from recent political turmoil.
Table 1: Companies Operating in Libya (Capacity in barrels per day)
Diversified operations in Libya
Companies like Total SA (ADR) (NYSE:TOT), Mabruk and Statoil ASA(ADR) (NYSE:STO) have diversified operations in both the western and southwestern territories of Libya and are less affected by the ongoing turbulence in the country. Zawiyah, located in the federal capital of Tripoli, is the only oil terminal that remained operational during the entire crisis situation. However, the capacity of Zawiyah is limited (at 200,000 bpd) and cannot sustain the country’s exports.
Table 2: Oil Terminals in Libya (Volume in barrels per day)
Oil reserves in Africa
Libya holds the largest oil reserves in Africa at about 47.1 billion barrels of crude as of January 2012. Libya’s production contributes approximately 1.5 percent of the global output and 4.3 percent of OPEC’s output. A curtailment of its oil production from Libya can, hence, put immense pressure on the oil prices.
‘Libya is an important oil source for Europe, with 60% of Italian refining capacity processing Libyan crude oil,’ says Phillip Chladek. According to EIA, Italy made up 27% of Libyan exports in 2010 and was the largest export market for the country. Therefore, this European nation will be the most affected by the disruption of supply from Libya.
Figure 2: Libya’s Crude Oil Exports by Destination in 2010
The oil minister of Libya, Mr. Abdelbari al-Arusi stated last week that Libya had lost about USD1.6bn in revenue since 25 July because of disruptions in production and exports.
Crude oil export terminals closed
Libya’s largest crude oil export terminals including El Sider and Ras Lanuf remained closed even this week but the small port of Marsa al Hariga had resumed operations. Libya declared force majeure on oil exports from the ports of Es Sider, Ras Lanuf, Zueitina and Brega on 19 August, suspending its contractual obligations following weeks of strikes, according to a report by Libyan Business News.
There was some optimism due to the re-opening of the port at Marsa al Hariga but Libya remains cornered with lost revenues now approaching USD 2 billion. The Prime Minister is in a tight spot, threatening the protestors with the use of force if they continue to block exports. However, after witnessing what happened in the neighboring country of Egypt, Prime Minister Ali Zeidan is not in a position to pursue any such action. The end of this crisis is not visible and will continue to put upward pressure on international prices.