Mixed outlook for MENA

Changing circumstances in the Middle East and North Africa (MENA) are altering perceptions of potential developments in Libya and Iran.

Since the end of the Muammar Gaddafi regime, observers have predicted quick restoration of Libya’s oil production to prewar levels. Libya’s oil minister reported crude production at 1.5 million b/d in late April and expected to increase to 1.6 million b/d by midyear. But some now are wondering if Libya’s rebound can be sustained amid increased disputes among tribal and militia leaders that could disrupt elections of the constitutional assembly scheduled June 19.

“A rigorous debate is unfolding about the role of the central government in post-Gaddafi Libya, especially in the oil-rich east,” said analysts with Barclays Capital Commodities Research. “In early March, around 3,000 political, militia, and tribal leaders gathered in Benghazi and called for the establishment of a semiautonomous eastern regional government. Many were injured in subsequent clashes between supporters and opponents of federalism.”

Well-armed militias may be the most immediate threat to the Libyan government’s security. “Ali Tarhouni, the former interim oil minister and deputy prime minister, has warned that Libya could resemble Lebanon if the militias are not quickly brought under control. According to the International Crisis Group, Libya’s rival militias do not see themselves as serving a central authority and have repeatedly clashed,” Barclays Capital analysts said.

They reported the interim National Transitional Council has been making cash payments to militiamen to keep them quiescent. Nonetheless, they said, the government could face rising discontent and social unrest if it can’t find a way to control the armed and often unemployed men serving in militias.

“The security issue poses one of the greatest challenges for Libya, especially as international oil companies have been reluctant to return to onshore facilities (home to over 90% of Libya’s oil production) and start exploration drilling,” said the analysts. Without foreign companies, they said, “Libyan oil production may well stagnate just below pre-crisis levels; worse, it risks slipping backward. Libya’s own companies are hampered by a lack of exploration drilling as tenders cannot be awarded until the [national] company’s 2012 budget is approved. With the transitional government only managing to sanction emergency spending, the national oil company has failed to secure enough funds for new drilling.”

Since 40% of Libya’s oil installations were damaged during the civil war, they said, “The maintenance currently required goes far beyond the routine. Temporary fixes have allowed Libyan output to resume swiftly, but we believe current production levels are simply not sustainable. Add to that the security challenges and budgetary problems, and even if the repercussions may not be evident immediately, the cracks in Libya’s production could appear as early as end 2012.”


Analysts at KBC Energy Economics, a division of KBC Advanced Technologies PLC, said Iran is now “looking less hawkish.” The spring rally in oil prices above $125/bbl was stimulated partly by fears Iran’s stubborn pursuit of nuclear capability might provoke a preventive air strike by Israel. In late April, however, Israel's military chief, Lt. Gen. Benny Gantz, recently expressed doubts Iran will produce an atomic bomb. This contradicts Prime Minister Benjamin Netanyahu who has said repeatedly Islamic leaders may use nuclear arms.

“This has got the market wondering whether some form of breakthrough may be about to reached” when Iran next meets with UN Security Council members May 23 in Baghdad, said KBC analysts. “Iran has said it is discussing with Russia a plan to avert the European oil embargo, which goes into effect in July, by halting expansion of its nuclear program and agreeing to an additional protocol to the nuclear Non-Proliferation Treaty that would allow inspectors to visit Iran’s nuclear sites unannounced,” they reported.

Russia’s Deputy Foreign Minister Sergei Ryabkov said a proposal was discussed at the Apr. 14 talks in Istanbul for Iran to freeze the number of centrifuges for uranium enrichment at current levels and place other restrictions on its centrifuge use in return for a halt to new sanctions by western powers. “EU officials working on the agenda for the Baghdad meeting have been upbeat about its prospects,” KBC analysts noted. However, Netanyahu criticized the Istanbul talks and continues to take a hawkish stance. “By upping the ante in a US election year, [he] has ensured that the stakes remain high,” analysts said. “While there may be some downward pressure on oil prices ahead of the Baghdad talks, it seems unlikely that these can resolve wider issues of geopolitical tensions in the Middle East.”

(Online Apr. 30, 2012; author's e-mail: samf@ogjonline.com)

Related Articles

Energy consumption to escalate

07/30/2013 World energy consumption will jump 56% in the next 30 years, driven by growing demand in developing countries, the US Energy Information Administra...

US, Mexico energy trade in flux

05/28/2013 Energy trade between the US and Mexico is in flux with rising crude production in the US, falling production in Mexico, and rising Mexican demand f...

Foreign crude supply concentrated

04/29/2013 It’s no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest It’s levels since 1997—down 1.3 mil...

Corn, ethanol prices squeeze profit

03/25/2013 Last summer, US prices for ethanol and corn reached such an imbalance that production costs exceeded revenue at relatively simple ethanol plants, t...

Working on the railroads

02/26/2013 The rapid increase of North American crude production has resulted in pipeline bottlenecks in some areas, forcing more reliance on rail transportat...

War, weather issues affect energy

01/28/2013 The fatal 4-day siege at the In Amenas gas production plant in eastern Algeria near the Libyan border that left 81 people dead “heightens concerns ...

2013 looks a lot like 2012

12/31/2012 New Year 2013 looks as though it will be much like the old one. There’s rioting in Egypt, confrontation with Iran, continued crisis in the Euro-zon...

Political crisis weighs on oil

11/26/2012 On Nov. 21, Egyptian officials announced a ceasefire agreement—which they helped broker—between Israel and Hamas leaders to end a week of fighting.

Storms, oil, and elections

10/29/2012 Hurricane Sandy was bearing down on the East Coast on Oct. 29, disrupting oil supplies, energy demand, and early voting in the last full week befor...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 


On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected