Wednesday, February 23, 2011

Libyan Oil Grinding to a Halt

Here's the latest:

At least 300kbd-400kbd of oil production are shut-in already, and likely more, but the situation is still confusing.
As much as a quarter of Libyan oil output has been shut down, Reuters calculations showed on Wednesday, as unrest prompted oil companies to warn of production cuts in Africa's third-largest producer.

Austria's OMV said on Wednesday it might be heading for a full production shutdown in Libya. Total, Repsol, Eni and BASF have also said they are either slowing or stopping output.

The latest comments point to a growing impact on oil output from Libya, which produces 1.6 million barrels per day (bpd) of high-quality oil, or almost 2 percent of world output. About 1.3 million bpd is exported, mainly to Europe.
According to Time Magazine's Robert Baer, anonymous sources close to Gaddafi say he is now giving orders to sabotage Libya's oil industry:
There's been virtually no reliable information coming out of Tripoli, but a source close to the Gaddafi regime I did manage to get hold of told me the already terrible situation in Libya will get much worse. Among other things, Gaddafi has ordered security services to start sabotaging oil facilities. They will start by blowing up several oil pipelines, cutting off flow to Mediterranean ports. The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos.
Libyan ports are shutting down:
Libyan cargo port operations have shut down due to increasing violence sweeping the country, Reuters has reported.

Operations at Tripoli, Benggazi and Misurata Mediterranean ports, which handle general cargo and container shipping, have closed.
In particular, oil exports appear to be halting completely:
Operations at Libyan oil ports were disrupted by a lack of communications, trade sources said, and flows from marine oil terminals in Libya were halted on Tuesday, an Italian government source said.

"The situation is worrying. This morning the oil terminals were blocked in Libya," the government source said.

It was not possible to get through by phone to Libyan oil ports or shipping agents on Tuesday.

"Everything is out," said a source with a major oil company. "We can't get through to anyone. Our operations people say contact is impossible with the shipping agents, port officials, anyone. The lines are all down."
The country appears to be descending into civil war:
Col. Muammar el-Qaddafi of Libya kept his grip on the capital on Wednesday, but large areas of the east of the country remained out of his control amid indications that the fighting had reached the northwest of the country around Tripoli.

Libyans fleeing across the country’s western border to Tunisia reported fighting over the past two nights in the town of Sabratha, home of an important Roman archeological site 50 miles west of Tripoli. Reuters reported that thousands of Libyan forces loyal to Col. Qaddafi had deployed there.

“The revolutionary committees are trying to kill everyone who is against Qaddafi,” said a doctor from Sabratha who had just left the country, but who declined to give his name because he wanted to return.
Of course, as for the oil production losses, the Saudi's say they stand ready to make up the difference:
“OPEC is ready to meet any shortage in supply when it happens,” the Saudi oil minister, Ali al-Naimi, said at a news conference after a meeting of ministers of oil producing and consuming nations in Riyadh, Saudi Arabia. “There is concern and fear, but there is no shortage.”
The next few months' oil statistics are going to be interesting, to say the least. It now seems increasingly likely that Libya's oil production (about 1.6mbd) is largely going to halt, or at least not get exported.  So we will see if Saudi Arabia's production really will rise to compensate. The problem, of course, is that Mr al-Naimi's idea of what constitutes a "shortage" may not be the same as the rest of us.


Stuart Staniford said...

More from Businessweek:

1) The Libyan National Oil Company declared Force Majeure on it's oil export contracts.

2) Nonetheless, at least one tanker loaded crude and sailed today, so exports have not totally halted.

Emil said...

Interesting collection of news, Stuart.
I agree, the coming months will probably once and for all settle the debate, although in my mind it was clear already in 2008, whether the much-touted 'spare capacity' of the Saudis is a reality or a poorly conceived hoax.

Personally, I think they will probably ask for as much external help as they can so to alliviate any pressure to perform.

Better keep the illusion going.
Sooner or later, though, a new situation like this will arise anew with a similar circumstance if they somehow keep the crowd under the spell for a few crucial longer moments, and that new situation will likely come much sooner than they are comfortable with. With current trends, entirely possible that it will happen this year. Perhaps even in their own country(although I doubt it, they are too important. The West won't allow it).

They probably have around 2.5-3 mb/d due to the crash in '08. But if they need to compensate Libya's share then that will shrink to dismal levels.

Remember, in '08 they had less than 2 mb/d in spare capacity and were completely unwilling to use it. Probably because they know not much time would be gained and the result would be for all to see the Emperor without clothes.

Well, we may now be close to that situation. If they have, say, 2.5 mb/d, then that will shrink to a mere 1 mb/d. Lower than they had in 08. Will they do it?

All eyes on the Saudis.

Emil said...

On a sidenote, Stuart, I would be really interested in a forward-looking post from your side where you merge the oil situation and the food situation and try to bring some clarity into the situation on what we might reasonbably expect during this year, or at least until the end of summer, in terms of the economy when one thinks of these two major factors acting as a confluencing force.

Although I am much newer to the energy and climate situation than you, I went back and read some of your old posts on the Oil Drum and enjoyed a lot of them, I would like to see a few - or at least one - more if that's possible?


Alexander Ac said...

OPEC will "save" us, only if not... :-)

Unknown said...

Why don't you call out this definition-of-shortage charade already? We know the target prices SA would like to sell at, and they are still pretending to be a swing supplier, but despite the fact that the market is very favorable AND there will obviously be a short-term crunch, they are just choosing not to produce more? Please. I agree that SA might have enough to cover just Libya's exports for a couple of years, but it's looking more and more like that will be taking them right to the wall.

Stuart Staniford said...

Italian oil co ENI CEO says today that Libya oil production has now fallen by 1.2mbd (out of 1.6mbd ish).

Stuart Staniford said...

Sorry - that last is from reuters Africa

Stuart Staniford said...

Also, China National Petroleum Corp says its facilities in Libya were attacked, and it's evacuating all it's people.

My take is that a total loss of Libyan production is now a done deal for a month or two at least. Until the security situation has stabilized in some fashion, producing oil in Libya would be like trying to produce oil in Somalia, with undisciplined armed gangs roving around.

Libya seems more likely to end up as a civil war between different tribes than it does a democracy.