Little enthusiasm for Libyan oil
Political instability and protests are putting of investors in the Libyan oil game
A year after oil firms jockeyed to secure the first deals in post-war Libya, political disorder and a large surplus of oil in Europe have sapped enthusiasm ahead of talks for 2013 contracts worth around $50 billion.
More than a year has passed since the ousters of Muammar Gaddafi took control of the Opec country, and while oil output has risen back to pre-war levels of 1.6 million barrels per day (mbpd), unrest still disrupt shipments and work at refineries. Protests and strikes cause expensive delays, while the continued presence of guns and rocket-propelled grenades in the capital is a concern for investors.
“The political instability and security problems make it less attractive for the international oil companies and for the traders as well,” said Charles Gurdon, managing director of Menas Associates, a political risk consultancy. Libya’s national congress appointed Abdelbari Al Arusi as oil minister earlier this month, although it is unclear how responsibilities will be shared with the National Oil Corporation (NOC), which currently oversees oil sales.
Complicating the talks is the fact that sweet, high-quality crude that Libya produces is increasingly difficult to sell. Global supply of similar, sweet grades is increasingly abundant because of the US shale oil boom, while at the same time, demand is falling because of closures at European plants, some specially designed to process Libyan crude. Last November, major traders such as Vitol and Glencore made their debut in talks with Africa’s third largest producer.
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