Libya will recommence its oil exports from its largest port, Es Sider, as early as next Monday. This past Tuesday, an oil tanker sailed from the port of RasLanuf, making its first shipment in almost a year, after the two ports were shut down by rebel forces.
The shipment from RasLanuf port carried 670,000 barrels of crude and is being transported on the tanker called Gemini Sun Aframax, chartered by the Austrian company OMV AG (ADR) (OMVKY). The company is engaged in oil and gas upstream and downstream operations.
According to National Oil Corporation, Libya’s state-held integrated oil company, the Gemini tanker is sailing toward Italy, Libya’s largest oil export market. The port of RasLanuf was given back to the state-run company in July by rebel forces. However, National Oil has since struggled to find buyers for its exports. It found buyers for the first shipment only after it reduced its prices.
Es Sider has a loading capacity of 340,000 barrels per day (bbl/d). Loading plans for the port include six tankers, with a capacity of 600,000 barrels each. The oil is stored at the port’s terminal for use.
The oil at the terminal will be divided among the state-run corporation and its partners, which are Marathon Oil Corporation (MRO), Hess Corp. (HES), and ConocoPhillips (COP). Meanwhile, the RasLanuf port, Libya’s third-largest oil port, has a loading capacity of 220,000 bbl/d.
According to the Energy Information Administration (EIA), Libya has the most proven crude reserves in Africa, with 48.5 billion barrels. It is also an important member of the Organization of the Petroleum Exporting Countries (OPEC). However, the country’s crude production has been negatively affected in the recent past.
Before the civil war began in February 2011, the country’s crude production stood at more than 1.6 million barrels of oil per day (mmbbl/d). The production declined to a meager 200,000 bbl/d in a matter of months during the violence. Post-civil war, the crude production had jumped back to approximately 1.5 mmbbl/d. However, due to frequent labor protests and power issues, the crude production was not sustained.
Labor protests were sparked by demands for better living conditions and an increase in salaries. It took a political turn and later transformed into addressing issues such as corruption and autonomy in the region, which almost crippled the Libyan economy. Protests escalated in July last year at major oil ports.
Production fell to 200,000 bbl/d in September last year as the rebel Zintan militia blocked pipelines connecting the Elephant fields with oil export terminals of Zawiya and Mellitah.
With the RasLanuf and Es Sider operational again, exports will receive a big boost. The Libyan economy has received almost 80% of all its export revenue through oil exports during 2012.
The ongoing crisis in Iraq, also an OPEC member, has caused companies such as Afren Plc London (AFRNF), Exxon Mobil Corporation (XOM), BP Plc (ADR) (BP), and Chevron Corporation (CVX) to suspend operations and evacuate a large number of their staff from Kurdistan. These companies may now look toward the lucrative opportunity presented by the Libyan oil reserves.
With the appointment a new PM Haider al-Abadi in Iraq, the situation in Iraq may improve, especially since al-Abadi is considered to be a ‘moderate Shia’ – unlike his predecessor. The price of Brent crude is a worldwide benchmark for crude oil price, and hit a new 13-month low of $102.37 yesterday. The International Energy Agency (IEA) estimated the growth in demand will drop by 180,000 bbl/d in 2014 to 1 mmbbl/d.
For 2015, the IEA projects the growth in demand to be 1.3 mmbbl/d, which is 90,000 bbl/d lower than expected. The weakened demand outlook will only add to the supply glut. The global crude output topped 93 mmbbl/d in July, an increase of 230,000 bbl/d, according to the data released by the IEA.
The commencing of exports from Libya will further put pressure on Brent crude prices, as Libyan crude output adds to the supply surplus that is prevalent in the global oil market.