IEA: Political Unrest Impacts Libyan Oil Production

The International Energy Agency (IEA) estimates that between 850,000 kb/d and 1 million b/d out of 1.6 million b/d of Libyan oil production is currently shut-in as political unrest in the country has prompted oil companies to evacuate employees and shut-in production.

The IEA said it continues to closely monitor developments with regard to Libya's production and export facilities. However, information on production levels and export volumes is incomplete due to the poor communications channels and staff shortages in Libya. "In addition, there continue to be conflicting reports on the status of Libyan port activity due to very high winds affecting operations in some of the ports," IEA said in a statement.

Reports from some European refiners indicate there is ample crude until at least the end of this month, and that they are now scheduling for April supplies. Currently, crude oil markets in Europe are not perceived as constrained, with crude demand relatively low due to a period of large-scale maintenance of refineries in Europe.

Precipitated by political corruption and authoritarian rule, high levels of unemployment, rising inflation, and poor living conditions in the region, popular protests began in December 2010 in Tunisia. The protests ultimately resulted in the ousting of Tunisian President Zine El Abidine Ben Ali in January 2011, Fitch Ratings said in a Feb. 25 report.

They spread quickly to Egypt, where protests focused mostly on acts of civil disobedience against former President Hosni Mubarak and his administration. Protests were focused primarily in the nation's capital city, Cairo, and ultimately resulted in President Mubarak's resignation on Feb. 11, 2011.

Since that time, protests have spread throughout North Africa and across the Middle East, including Algeria, Yemen, Libya, Jordan, Pakistan, and Bahrain. Libya represents the first major oil-producing country and member of OPEC to experience this recent unrest. This has heightened the world's focus on the unrest in the region and oil prices have responded by moving higher.

As violence has increased in Libya, oil companies have announced that they are evacuating employees and shutting down production. To date, Eni Spa (ENI; 'AA−'/Negative Rating Outlook), Repsol YPF (Repsol; 'BBB+'/Stable Rating Outlook), and BP plc (BP; 'A'/Stable Rating Outlook) announced that they are temporarily suspending operations in Libya as a result of the unrest.

North American E&P Exposure to Libya

Exposure to North Africa and the Middle East is limited primarily to the integrated and large independent oil and gas companies. According to a recent analysis by Fitch Ratings, Apache maintains the highest exposure to any single country experiencing turmoil, with 163,300 barrels of oil equivalent per day (boepd), or 24% of total production, in Egypt.

Exposure to Libya includes Marathon Oil (12% of total production), Suncor (8% of total production), Hess (Hess, 5% of total production), ConocoPhillips (ConocoPhillips, 3% of total production) and Occidental Petroleum Corp. (1% of total production). Beyond Egypt and Libya, Algeria is the other North African country that could present the largest concerns for North American-based upstream companies.

Companies with sizable exposure to Algeria include Anadarko (7% of total production), Hess (3%), and ConocoPhillips. Yemen also remains a concern with political turmoil there potentially affecting Nexen (11% of total production), Occidental Petroleum (6%), and ExxonMobil.

Fitch in its Feb. 25 report said it anticipates that credit implications resulting from the political unrest will be manageable for North American-based oil and gas companies. Key drivers that could result in rating actions would stem from lost production, resource nationalization, or changes to the existing fiscal terms related to higher taxation or changes to existing licensing agreements.

Impacts to credit ratings are limited by existing high levels of liquidity and opportunities for offsetting capital expenditure reductions and/or higher oil prices. "Rating implications would be on a case-by-case basis and would likely occur only if widespread and long-lasting production implications were to happen," Fitch said.


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