Immediate impact of Libyan crisis
The ongoing Libyan
civil war and Western military intervention is set to take about 860,000
barrels per day of production, over a period of 90 days, out of the oil market
this year.
An unresolved crisis may also lead to long-term exits by
international oil companies from the North African country, putting Libya’s
state-owned National Oil Corporation’s ambitious production growth goals under
pressure.
Long term impact of
Libyan crisis
Almost all international oil companies operating in Libya
have evacuated their staff and cannot be certain when normal operations will
resume. There are a number of uncertain factors affecting its estimates of the
impact of the crisis on Libyan output, including how long the current abnormal
situation lasts, which will determine how rapidly production can be returned to
normal levels.
Operations at some projects are at “hot standby” as Italian
player Eni has indicated, ready for a quick restart. Other projects will
require major work before a return to normalcy.
More fields have been shut in as the unrest continues to
spiral. We think it will take more time to resume production than previously
estimated (30 days). Hence, we recommend raising the estimated production cut
by another 60 days for the fields identified earlier, as well as for the newly
impacted fields. The rate at which output recovers after the current crisis is
over will to a great extent depend on which side wins.
What is next for IOC’s
With Gaddafi’s forces now apparently halted, Eni, BP,
Wintershall, OMV, the big American players such as Hess, Marathon and
ConocoPhillips, and a long list of other players and hopefuls, not least
supermajor Shell at its gas exploration site, all have to consider two
relatively simple options.
The worst option for the oil firms is that Gaddafi succeeds
in dragging out the confrontation or wins the day. In these circumstances, it
has become clear that neither Eni nor any of the others will really return to
Libya while Gaddafi remains in power. Admittedly, Eni has an unusual position
and may be granted a special status to continue producing gas for the local
Libyan market.
Nearly all the companies with assets in Libya will now find
that they are rooting for an early end to Gaddafi’s regime as the only clear
way for their return. The Libyan leader is threatening to bring everything else
– possibly including some vulnerable oil facilities - down with him if he has
to leave the scene after 42 years in power, but it may be too late for him to
follow through on the bluster.
Acquisitions and divestitures in Libya - 2006 to 2011
Source: Derrick Petroleum M&A Database - www.derrickpetroleum.com
