The attacks in Benghazi on Sept. 11, 2012, that captured our nation’s attention continue to spur debate on the stability, or lack thereof, in the region. The events that transpired on that day were heinous and will likely never be forgotten. One hope that can come of this is that a heightened awareness has been created and that precautionary measures will be taken much sooner than they might typically have been implemented.
If the recent move by BP plc (ADR) (NYSE:BP) is any indication, the lesson has been learned.
My reserves are bigger than yours
The importance of Libya to the oil world cannot be understated. The country, which has undergone dramatic changes since 2011 when Col. Moammar Gadhafi was killed by rebel forces, is home to Africa’s largest proven oil reserves. The combination of these reserves with Libya’s place at the OPEC table means that actions in Libya have far-reaching effects on the world’s flow of oil.
Since Fall 2011, production in Libya resumed faster than most expected. In May of last year, it is estimated that production totaled 1.4 million barrels per day (MMbpd). The light, sweet crude and natural gas that companies such as BP plc (ADR) (NYSE:BP) and Eni SpA (ADR) (NYSE:E) have been producing here account for around 95% of Libya’s total export revenue.
Trouble on the horizon?
During the conflict, oil and gas companies chose to halt activities within Libya. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has since chosen to abandon its operations in the country altogether. While it cited lack of success in test wells, I have to believe that regional tensions prodded this decision as well. As for BP plc (ADR) (NYSE:BP), it lifted its force majeure in May of last year, but recent advice from the UK Foreign and Commonwealth Office prompted the company to announce the removal of all “non-essential overseas staff” from the country.
To add validity to these warnings, Eni SpA (ADR) (NYSE:E) management spoke publicly about the tension-filled atmosphere just last week. While there are hopes that violence will eventually subside, it fears that near-term disputes are likely to continue. OPEC meets on May 31, and it will be interesting to hear if any comments are made regarding the actions and comments of two of Libya’s most important producers.