Archive for 'June 2011'

    Diplomat: Libya’s rebel-held oil facilities ‘largely undamaged’

    June 27, 2011 1:04 PM by Eric Watkins
    With Libya’s oil infrastructure thought to be largely undamaged in rebel-held areas of the country, a British diplomat said that exports of oil could resume within 3-4 weeks following the fall of the embattled leader leader Moammar Gadhafi.

    "We don't think the oil infrastructure has been particularly badly damaged physically,” said a British diplomat. “The current estimate is that in the east they can start pumping within three or four weeks.”

    The statement followed other reports that have emerged in recent weeks, with some saying that output from Libya could reach 355,000 b/d from rebel-held areas and others saying it would be marginal and not up to full capacity until 2015.

    A report by Goldman Sachs Group Inc. said that Libya’s oil exports could rise by as much as 355,000 b/d from areas held by rebel forces and up to 585,000 b/d if Gadhafi is removed from power and production resumes from western fields currently held by his government.

    Earlier, however, the International Energy Agency said that the North African country’s oil production faces a “long haul” to make a full recovery in the wake of the civil war gripping the land and that it will not return to full capacity until 2015.

    The British diplomat’s remarks came as word emerged of a team of officials from the US, UK, Italy, Turkey, Denmark and other nations which has spent several weeks in eastern Libya discussing scenarios with opposition leaders.

    "We are planning carefully and comprehensively for the days, weeks and months after Gadhafi has gone," said the diplomat. The plans, due for completion next week, include a proposed timetable for resuming oil production in areas of the country now held by forces opposed to Gadhafi.

    Rebels have held the eastern part of Libya since the outbreak of hostilities in February, and they sold their first tanker full of crude to US refiner Tesoro in April.

    Following the sale to Tesoro, the rebels scaled back their plans to export more oil after rocket attacks by Gadhafi’s forces seriously damaged a pumping station and production facilities at southeast Messla oil field on Apr. 4.

    Another attack hit a pumping station halfway along the 510 km pipeline from Messla to Tobruk port, killing eight rebels serving as guards (OGJ Online, May 17, 2011).

    Rebel Oil and Finance Minister Ali Tarhouni, without specifying a timeline, has since said that the opposition National Transitional Council hoped to “soon” resume oil production of as much as 100,000 b/d (OGJ Online, June 9, 2011).

    Contact Eric Watkins at hippalus@yahoo.com

    Sudan: Obama urges ceasefire in oil-rich south

    June 20, 2011 4:44 PM by Eric Watkins
    US President Barack Obama urged the Khartoum-based government of northern Sudan to end its military operations against southern opponents in the oil-rich border state of South Kordofan, a scene of intense fighting in recent weeks.

    "The government of Sudan must prevent a further escalation of this crisis by ceasing its military actions immediately, including aerial bombardments, forced displacements and campaigns of intimidation," said Obama, who renewed the US commitment to the peace process underway in the region.

    For several weeks, Khartoum’s military forces have been fighting southern-aligned armed groups in Southern Kordofan, the north's main oil state along the border with South Sudan, stepping up tensions ahead of the south’s independence on July 9.

    At stake in the conflict is control, or at least a share, of the country’s oil export revenues, a point stressed by the north’s Finance Minister Ali Mahmud.

    "Sudan will lose 36.5% of its income from July 9 because this is the percentage of oil revenue that the government gets from the oil produced in the south," said Mahmud.

    Khartoum receives around 50% of the oil revenues generated by the south, which produces 75% of Sudan's 470,000 b/d crude output.

    According to the US Energy Information Administration, Sudan’s oil exports represent over 90% of the country’s total export revenues, but further development is “hindered by conflicts and sanctions.”

    That view was underlined last week when Khartoum threatened to stop the southern government from using its petroleum infrastructure, which includes the 1600-km Greater Nile Oil Pipeline, several refineries, and the export terminal at Suakin on the Red Sea.

    "We have sent a letter to south Sudan, to inform them that they cannot use the pipelines or the refinery or the port after July 9 unless we reach a deal about the price of renting this infrastructure," Mahmud added.

    So far, southern officials have remained silent about plans mooted a year ago for the contraction of a new pipeline from the south through neighboring Kenya to a new export facility being planned for the island of Lamu.

    At the time, analyst BMI suggested that southern officials were concerned not to raise the ire of the northern regime.

    “Any move on the part of a future southern Sudan to assert the independence of its oil industry would likely be seen as highly provocative in Khartoum and could lead to violence” (OGJ Online, July 16, 2010).

    Khartoum is desperate to offset the looming fall in its income even as it struggles to cope with soaring inflation, a weakening currency and foreign debt of $38 billion which, together with US sanctions, has choked its sources of external financing.

    Washington has offered Khartoum a number of incentives in exchange for an orderly transition to independence for the south: gradual steps toward full normalization of diplomatic ties, the removal of Sudan from the US terrorism blacklist, and an international agreement on debt relief.

    President Obama reminded Khartoum of the stakes: "I want to speak directly to Sudanese leaders: you must know that if you fulfill your obligations and choose peace, the United States will take the steps we have pledged toward normal relations.”

    But the president also warned that “those who flout their international obligations will face more pressure and isolation and they will be held accountable for their actions."

    Sudan's President Omar al-Bashir last week said his army had matters “under control” in South Kordofan, as clashes continued between his government’s troops and members of the former southern rebel army, the SPLA.

    "The situation in South Kordofan is under the control of the Sudanese Armed Forces which are now clearing the state of the remaining rebels," Bashir said.

    Bashir’s top aide Nafie Ali Nafie said the country’s ruling National Congress Party had given a "free hand" to the armed forces to bring the situation in South Kordofan under control.

    Sudan analyst John Ashworth said that the north’s military actions in the states of Abyei, South Kordofan and Blue Nile amounted to “a deliberate attempt by Khartoum” to seize control of the oil-rich regions ahead of the July 9 deadline.

    Contact Eric Watkins at hippalus@yahoo.com

    Iraq's oil revenues exceed $34bn; minister reconsiders output plan

    June 10, 2011 3:15 PM by Eric Watkins
    Higher oil prices helped Iraq earn $34.1 billion in oil revenue in the first five months of this year, a 34% increase over the government’s budgeted revenue.

    "This means that there is a surplus in the first five months of $8.7 billion," said Deputy Prime Minister Hussain Al-Shahristani, who added that government calculations had earlier estimated $25.4 billion in revenue for the period.

    The announcement came as the country is considering a downward revision to its earlier goal – set by Al-Shahristani – of increasing its oil production capacity by nearly 9.35 million b/d by 2017 from the current 2.65 million b/d.

    Iraq’s Oil Minister Abdul-Kareem Luaibi, reversing earlier policy statements, said his country is now considering revisions to the prior goal of increasing oil production capacity to 12 million b/d.

    "We are studying several scenarios for more economic production rates, we can reduce the production and increase the period to reach the plateau targets," said Luaibi.

    "For example, instead of producing 12 million b/d for 7 years, we can produce 8 million b/d for 13 or 14 years," the minister said, reversing earlier remarks by Al-Shahristani, Iraq's deputy prime minister for energy.

    Last month, Al-Shahristani said Baghdad believes the goal of "12.5 million bpd … is realistic and feasible, as currently there are no signs we will not be able to achieve this goal in a timely manner."

    Even as late as June 4, Al-Shahristani was quoted as saying that "export terminals and pipelines will not be the obstacle" to the country's increased exports.

    After two bidding rounds in 2009, Iraq signed a series of agreements with international oil firms in an effort to increase its production capacity to 12 million b/d by 2017 from the current 2.7 million b/d or so.

    But analysts have questioned whether Iraq can actually reach its stated target of 12 million b/d due to infrastructure constraints, suggesting that a goal of 6-7 million b/d might be more realistic.

    The US Department of Energy noted recently that Iraq faces "many challenges" in achieving the production targets it has set, largely because of the "lack of an outlet for significant increases in crude oil production."

    In March, the International Monetary Fund also cast doubt on Iraq’s production targets by drawing attention to the need for vast investment in port facilities, pipelines, desalination plants and storage facilities.

    However, Al-Shahristani countered by saying that his country's development plans for oil fields were proceeding "normally" and even faster than contracted.

    Al-Shahristani said there were no major delays in Iraq's new export facilities being built to handle the extra crude expected from a series of agreements signed with international oil companies.

    "We are comfortable that new [oil] export outlets will be ready to received extra crude according to the plans to boost oil production with the contracted oil companies," he said (OGJ May 23, 2011).

    Meanwhile, Luaibi said his ministry had not yet approached oil companies over renegotiation, but he insisted that the proposed changes would not have adverse effects on the companies.

    "In general, the oil companies will not be hurt,” said Luaibi, adding that “we can increase the period to reach the plateau targets to 13-14 years.”

    But analysts said that the contracts are production driven, and that oil companies receive fees for each barrel they produce. Reduction in the country’s overall target could mean lower returns for oil companies, at least in the short term.

    "The point about increasing the plateau period, is that sufficient to compensate the IOCs (international oil companies) for lower production? We have to wait and see," said one oil executive working in Iraq.

    "Yes, potentially, it gives the same number of barrels – lower plateau but longer years – but money has time value ... It is not a very simple and straight forward calculation."

    IHS Global Insight analyst Samuel Ciszuk said that Iraq’s open acceptance of a much lower target highlights the challenges facing the country in addition to renouncing its ambition to rival Saudi Arabia as a swing producer.

    "Few if any forecaster, even outside of the energy industry, has really planned for Iraq to come anywhere near its 12 million b/d production target, meaning that on the face of it the Iraqi target slash should have few implications on the markets," Ciszuk said.

    Contact Eric Watkins at hippalus@yahoo.com
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