IOCs departing Libya ahead of stepped-up violence

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 22 -- International oil companies (IOCs), led by Italy’s Eni SPA, are either evacuating or making plans to evacuate Libya as increased violence in the North African country heralded the possible end to the 41-year rule of the country’s leader, Muammar Qaddafi.

“Italy and particularly Eni are heavily exposed in Libya and stand to lose a great deal if things fall apart,” said Nicolo Sartori, an energy and security researcher at Rome’s IAI Institute for International Affairs. “Eni’s production and exploration interests in the area are considerable.”

“The market is naturally jittery given the fact that Eni has 10-year contracts that could suddenly become scrap paper if the people that negotiated and signed them are gone,” said a fund manager at RMJ Sgr in Milan.

Apart from concerns about the impact of the violence on the share prices of individual firms, analysts said the situation in Libya was creating uncertainty—and therefore higher prices—on global oil markets.

“The reinjection of political uncertainty is likely to still be a concern for the market,” said Barclays Capital in a research note.

More ominously, Edoardo Liuni a financial analyst in Rome at IlNuovoMercato.it, said, “Certainly all the oil majors will be shaking if the new leaders decide to nationalize everything.”

Christine Tiscareno, an analyst at Standard & Poor’s in London, was more sanguine in her outlook. “It looks like the protesters are pragmatists, not idealists,” Tiscareno said, adding, “If they overthrow the regime, they’re still going to need revenue from foreign oil companies.”

Meanwhile, in an effort to undermine economic support for the Qaddfi regime, US Sen. John Kerry urged all IOCs to immediately cease operations in Libya.

All IOCs should stop operations “until violence against civilians ceases," said Kerry, chairman of the Senate Foreign Relations Committee, who also suggested that the Obama administration “should consider” reimposing US sanctions on Libya.

Ahead of Kerry’s call, Eni said it has already begun to evacuate nonessential staff and dependants, but insisted that its oil production in Libya is continuing as normal. Eni produces 250,000 b/d of oil in Libya, or about 14% of the firm’s total production.

Oil industry and shipping sources said there was no sign of disruption to exports from Libyan ports, but several sources said that Eni’s flow of natural gas through Greenstream Mediterranean pipeline is slowing.

Austria’s OMV AG and Repsol-YPF SA of Spain are also affected by the events in Libya. OMV, which produces 12% of its output from Libya, is withdrawing all nonessential staff, while Repsol-YPF, which relies on Libya for 3.8% of its total output, is suspending its exploration and production operations.

“We are doing our maximum to ensure the safety of our employees,” said a spokesman for Total SA, which reported production capacity of 60,000 b/d in Libya out of its global production of 2.28 million b/d.

Wintershall said it was preparing to wind down oil production in Libya and fly out 130 people of varying nationalities and their families to ensure their security. Wintershall also is taking steps to suspend its production in the country, currently about 100,000 b/d.

A BP PLC spokesman noted that the firm has about 40 people in the country, mostly there to help ready an onshore rig to start drilling in the west of the country.

"We are looking at evacuating some people from Libya, so those preparations are being suspended but we haven't started drilling and we are years away from any production," the BP spokesman said.

A spokesman for Royal Dutch Shell PLC said that the firm, whose operations in Libya are also limited to exploration, has temporarily relocated the dependents of expatriate staff outside the country.

A spokesman for Norway's Statoil, which participates in onshore oil production and exploration in Mabruk field and in the Murzuk basin with Repsol-YPF, said the firm has closed its office in Tripoli and that "a handful" of its foreign workers are leaving the country.

Contact Eric Watkins at hippalus@yahoo.com.



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