4 September 2013
Protests and blockade started by Guards who toppled Mummar Al-Gadhafi and workers led to a decrease in oil production in Libyan facilities. Guards accuse authorities of corruption while authorities accuse guards of selling the crude oil on the black market. Protests have been going on since late July this year which put Libya on the spot. Libya’s oil is extracted by government run National Oil Company (NOC).
Libya produced 1.5 m to 1,6m barrels per day until Al-Gadhafi was ousted; now production is below 100.000 bpd which is less than a tenth capacity. Libyan economy depends significantly on oil production, with oil accounting for more than 95 percent of export and 80 percent of its GNP. Government runs on oil reserves thus the civil servants may not get their salaries by the end of this year.
According to Eugene Lindell an energy analyst from Vienna, disruption of oil production in Libya may lead serious problem in the market. Expert also stressed the importance of Libya on high quality crude oil production. Quality of the kind produced in Libya is preferable by European refiners. According to BP’s report Libya has Africa’s largest proven oil reserves.
Libya is not the only country having this kind of trouble, due to theft Nigerian light sweet barrel prrice has also fallen dramatically; Azeri’s have been trading light sweet barrels over North Sea oil for over $6 per barrel in European market which is two years high.
Bank of America said that global shortfall in oil will leave the world vulnerable to supply crunch in case the Syria strike goes wrong. The outage is estimated to be 4 million bpd.
On the other hand International Energy Agency (IEA) says the demand is met adequately and agency is prepared for a possible massive disruption of supply regarding the Libyan case. Olivier Jakob of consultant Petromatrix in Zug, Switzerland considers this as a major loss “We don’t see how the IEA will be able to stay quiet for long”
BP is remaining silent about ongoing situation in Libya; BP has entered the country in 2007 but kept delaying operation due to Arab Spring and political mayhem. It is a wonder if BP will give up the country. John Hamilton of London oil analyst says; “the bellwether is BP” if BP decides to withdraw all others will abstain too.
By Selahattin Cerrah