MATT ZBOROWSKI
STAFF WRITER
Largely undercutting a true lower-for-longer oil-price scenario, wherein the sub-$30/bbl touched in February becomes the norm as it was pre-2003, has been persistent oil production outages in nations that double as the world's biggest producers and biggest hotbeds of political instability.
In the wake of last year's FIFA scandal, UK-based risk consultancy Verisk Maplecroft updated its ranking of countries it believed at the time posed an "extreme risk" to businesses due to corruption. High on the list were energy powerhouses Venezuela, Mexico, Russia, Nigeria, Iran, and Iraq.
More recently, the firm updated a similar list called the Civil Unrest Index, which covers 198 countries and "measures triggers for unrest, the frequency and severity of mass demonstrations and protests, the effects on business, and the mechanisms in place to avert disruption."
Missing MENA output
Current and former major oil-producing nations abound the top of that list as well, with, of course, Syria ranking first amid its half-decade-long civil war that erupted from antigovernment demonstrations. Hundreds of thousands of Syrians are estimated to have lost their lives since it all began, with millions more attempting to flee the country in search of a safer existence.
Once the eastern Mediterranean's leading oil and gas producer, Syria's average oil production plunged from a stable 400,000 b/d during 2008-10 to a mere 25,000 b/d by 2014, according to estimates from the US Energy Information Administration. Islamic State has targeted oil installations in an effort to fund its military operations, and in turn those installations have become targets of opposition airstrikes.
It's a similar story in No. 3 Libya, where oil output plunged from 1.6 million b/d before Muammar Gaddafi was killed in 2011 to just more than 300,000 b/d last month, data from the Organization of Petroleum Exporting Countries indicate. Much of the recent declines are attributed to blockades and installations damaged by ISIS. However, positive strides for its oil sector were made this month as three oil terminals reopened under a deal between the presidency council brokered by the United Nations and Ibrahim Jidran, branch leader of the Petroleum Facilities Guard (PFG).
Nigerian, Brazilian accountability
Also appearing in the top 10 are India at No. 4, Mexico at No. 7, and Nigeria at No. 10. While both India and Mexico have recently taken measures to encourage foreign investment and involvement in their oil and gas sectors, Nigeria remains a dicey proposition for operators such as Royal Dutch Shell PLC and Eni SPA. OPEC estimates production from its most populous country fell from nearly 2 million b/d in 2014 to 1.5 million b/d last month.
A large part of that drop is attributed to militants, namely the Niger Delta Avengers, sabotaging critical oil systems. Incidentally, the disruptions have shifted part of the nation's military focus away from Islamist group Boko Haram. The government several years ago essentially paid off militants in the Delta, and has recently offered to negotiate. But, with oil prices low, the government now lacks cash to dole out.
Charlotte Ingham, Verisk Maplecroft principal political risk analyst, noted "poor economic performance is also a critical bellwether for the likelihood of civil unrest," citing Nigeria as an example. "In addition, widespread political and ethnic discrimination or corruption can inflame popular discontent and trigger significant events," she said.
Placing 15th is Brazil, where former board member of state-owned Petroleo Brasileiro SA and currently suspended President Dilma Rousseff awaits her impeachment trial just as South America's first Olympic Games draw to a close. "In 2016, corruption has been the catalyst for the biggest protests seen so far," the consultancy said. "Brazil's Lava Jato bribery probe brought the public out into the streets in their millions, causing major disruption to business in the country's commercial centers." Petrobras has lost billions of dollars amid the twofold blow of the scandal and low oil prices.
When the cycle of corruption and civil unrest is inflamed by the presence of oil, the resulting chaos is often reflected in the oil market. Recent events in major producing nations such as Syria, Libya, Nigeria, and Brazil, along with the hundreds of thousands of jobs lost globally amid the downturn of the last 2 years, leave one to wonder: What is the price of stability?
