Libyan oil production will take years, not months, to return to full capacity once a political solution to the conflict is found, according to Barclays Capital.
“The reincorporation of Libyan oil into the world market increasingly seems a distant possibility” according to the study, which warns of a lasting political vacuum after the potential fall of the Gaddafi regime.
Shokri Ghanem, the chairman of the Libyan National Oil Corporation, has left the country for Tunisia, in what is being called by the Libyan rebels and the British foreign office a defection.
Two days ago, Libyan officials were denying the story, but Moussa Ibrahim, Libyan government spokesperson, has said he had not managed to contact Mr Ghanem on the phone since Monday night, when speculation about his defection had already begun.
Mr Ibrahim added that, even if Mr Ghanem had defected, it would not be a “big deal” and would be “his decision”. He added that high-ranking regime officials had defected before. “We are not relying on any one individual,” he said.
Oil production at the Sarir and Misla oilfields could restart within weeks, the Libyan National Transition Council has said.
The facilities above the wells had been shelled by Gaddafi loyalists, which brought production to a halt. But rebels are confident they could soon have oil flowing again down the pipeline to Tobruk, which they say has not been damaged. This would bring back an estimated 300,000 b/d of production, which could help the constrained oil markets.
The news, which was broken by Petroleum Economist, does not appear to have made a dent in the oil price though, which has bounced back after a shaky start this morning. That may be because the rebels have made similar predictions before, telling the FT in early March that production could restart in two weeks.
In this week’s readers’ Q&A session, Amrita Sen, oil analyst at Barclays Capital, answers your questions.
In the first of two posts, she discusses whether speculation is driving up the oil price, whether such an increase could trigger another recession and when “peak oil” might occur.
Later, she will discuss drilling in the US, national oil subsidies and growing demand from the Middle East.
(NB – Because of a very high volume of questions, we were not able to tackle every question submitted. Apologies if yours was not answered.)
Next week, Michael Bromwich, director of the US oceans regulator, will be answering your offshore-drilling queries. Email questions to email@example.com by the end of Sunday, April 10th.
But for now, over to Amrita:
Amrita Sen, BarCap’s oil analyst, has kindly agreed to extend the deadline so more Energy Source readers will get the chance to ask their questions.
Amrita is one of the oil industry’s best known analysts, and is expert on everything from the effect of the Libyan conflict on oil supplies to what high oil prices mean for Opec and the wider economy.
Email all your questions to firstname.lastname@example.org by the morning of Tuesday, April 5th.
Over the past week, the oil price appears to have moved in sync with events in Libya. When Gaddafi looked close to quashing the revolution, prices dropped with the expectation that Libyan oil would start flowing again. Every time the rebels have been given a boost, oil prices have gone back up.
So last Tuesday, as pro-Gaddafi forces neared Benghazi, oil dropped 3.9 per cent. But when UN Resolution 1973 was passed on Thursday, it went up 3.5 per cent. It fell again after Gaddafi announced a ceasfire, but rose as evidence came in of his attacks on rebel-held towns. Today, as markets react to the concerted bombing campaign over the weekend, oil has continued to rise, taking Brent back over $115 a barrel.
A note has come through from Moody’s about oil companies operating in the Middle East, which makes some interesting points.
Its main thrust is that any disruption to supply from Libya, even for major players in the country, will be counteracted by a surge in oil prices.
One reason for that is that Libya taxed these companies at roughly 94 per cent. It has previously been said that one risk to IOCs is that if a new regime comes to power it will inflict more punitive terms on these companies as a populist measure. But realistically, it couldn’t get much more punitive than it already was, at least not without pushing out companies altogether and so stopping that source of revenue for the regime altogether.
Shell has begun to ship liquid natural gas cargoes into Tokyo to help meet their energy demands in the aftermath of the earthquake and subsequent nuclear crisis. The first batch into the Tokyo Bay area was agreed on Monday night, and significantly for global LNG prices, it had originally been intended for elsewhere.
This was confirmed by the CEO Peter Voser at Shell’s strategy day, where unsurprisingly, much of the focus from journalists was on recent events in Japan and the Middle East. As far as Japan’s effect on gas prices, Simon Henry, the company’s chief financial officer, had this to say:
Last night, we agreed the first cargo into the Tokyo Bay area. We will not be taking advantage of the short term pricing implications of that.
More towards the medium term, after the last earthquake in Japan, the country spent two years bringing the nuclear plants back online, which did support the LNG markets.