When Muammar Gaddafi’s son said that Libya is not Egypt, in one of his TV appearances after demonstrations started in Libya, he was definitely right. Egypt itself just went through a major change, but it was totally different from what is currently happening in Libya. Egypt’s demonstrations were wholly white, for instance it did not seek blowing up petroleum infrastructure as in Libya. Italian group Eni SpA, which in Egypt is a major producer with more than 200,000 barrels of oil per day, commented on Libya’s events “There has been a major change in Egypt; we did not lose one barrel, so a change does not necessarily mean an impact on our production”
On the other hand, Eni, in Libya they are considered as the biggest foreign oil operator producing around 280,000 barrels of equity oil equivalent per day, after the events they said they will stop all oil production in Libya, “Producing oil from Libya will come to an end fairly soon; I am talking of day. Eni has not loaded any crude cargoes from Libya this week,” Eni’s Chief Executive Paolo Scaroni told reporters.
The International Energy Agency (IEA) said that it is closely monitoring the situation in Libya like it did in Egypt, but the difference that in Egypt protests focused mostly on acts of civil disobedience against the authority with no harm to the petroleum constructions. IEA reports on Libya included, “As violence has increased in Libya, oil companies have announced that they are evacuating employees and shutting down production. Eni Spa, Repsol YPF, and BP plc announced that they are temporarily suspending operations in Libya as a result of the unrest.”
The world also woke up on the news of oil rises as Gaddafi bombs infrastructure. His forces struck an oil pipeline leading to Es Sider and dropped bombs on storage tanks in the Ras Lanuf oil terminal area in the eastern section of Libya that is rebel-controlled. Rebels said government forces also hit an oil pipeline leading to Sidrah. “The large explosions and enormous columns of smoke from storage tanks and other facilities in Ras Lanuf, close to the Es Sider terminal, are perhaps more than merely symbolic,” Barclays Capital Oil Analysts headed by Paul Horsnell said.
Moreover, Libya’s Al Jurf offshore oil field has stopped producing amid turmoil in the country, Total Chief Executive Christophe de Margerie told journalists at a media briefing, “We were one of the last producers (in Libya) because one of our fields (Al Jurf) is offshore. We were still producing at that field, but now it is stopped.”
“Will the shut-in volumes go higher? The answer is yes,” Societe Generale’s Oil Analyst Mike Wittner said.
“It is a question of time whether oil facilities are getting targeted. And if it happens it will take months to repair damaged facilities. If the violence spread into oilfields, repair work to upstream facility even takes longer than downstream,” Wittner added.
The experts are looking at the events in Libya and its influence on the country and the world. Egypt is among those countries that were surely affected by Libya’s late actions, the high prices of oil and gas specially that Egypt just witnessed a major change and managed to go through it with no damages to the petroleum facilities or personals. Eng. Abdalla Ghorab, the newly appointed Petroleum Minister, said that the production rate was not affected by the political situation in Egypt and has not changed from its normal rate of 685 thousand barrels of oil.
“The development plans were not affected also and still going as scheduled. We also expect future exploration and development of oil and gas fields.”
“Foreign companies operating in Egypt have deposited plans through the current fiscal year targeting more development, exploration, production. Also strengthening operations in their concession areas to meet the local demand of energy,” Ghorab told reporters.
The influence of Libya’s events on Egypt may accrue in the oil prices and Egyptian labor that returned from Libya. “The events in Libya will impinge on the petroleum sector in Egypt and also the economic situation in the Middle East. Libya is one of the major oil producers in the Middle East and Africa,” an official source from the ministry told Egypt Oil and Gas Newspaper.
“Many of the petroleum labor in Libya are Egyptians and they are returning after most of the oil firm left Libya. They will be considered an overload on the local economy, especially that they are not well educated and it will bad hard on them to find new jobs in such events,” added the source.
Other experts looked at the influence from another side, of which that Egypt should cease the opportunity to fill the petroleum gap cause by the shut down in Libya. Saudi Arabia is already trying to rise in the picture by announcing that it’s willing to fill Libya oil gap. Also the newspapers reported that Top world oil exporter Saudi Arabia is in talks with European companies affected by the disruption in Libyan supply and is willing and able to plug any gaps in supply, mainly with Spanish and Italian oil firms which were hit by the Libyan shutdowns. “We are in active talks with European refineries to find out what quality they want and we are ready to ship it as soon as they need it. This is the way buyers and sellers work. We need to find out what they want before we take any action,” a senior Saudi source told Reuters.
Amr Kamal Hamouda, Head of the Fustat Centre for Studies and an oil expert, saw that the event in Libya will surely affect the Egyptian oil sector as Egypt is part of the Middle East world. “The difference between Egypt and Libya that our demonstrations weren’t about damaging petroleum infrastructure.”
“The Egyptian people were smart not to harm their own economy and they know how the foreign companies would react if the same happen in Egypt. Now we must focus on offering our refineries to European companies to bring their crude oil and we start to be their safe direction.”
“Lately we heard a lot of news about refineries being burned and bombed in Libya and without doubt the foreign companies will look for safer grounds,” said Hamouda.
The official source agrees with Hamouda that Egypt should be attracting foreign companies to the local market throw showing the safety and stability of the country, “Egypt should act like Qatar is now rising to help Japan to cover its need of energy after the nuclear plants were shut down due to the horrible earthquake.”
Recently, Reuters reported that Qatar offered to provide natural gas supplies to Japan, as their main source of energy is being shut down.
Hamouda also commented on the current petroleum situation in Egypt, “After the 25th of January events, the petroleum sector should work on its deficiencies. The improvement should include the exploration, contracts, currency issues, and the waste of public money.”
“Paying the foreign partner its share and the old debts is main factor in attracting more investments into the Egyptian market. Setting a clear work agenda and targets will show the international companies how stable the Egyptian petroleum sector.”
“Fixing the old exporting marinas, losing all the old obstacles that used to stand in the road of development. By conducting development work in those marinas, only able to receive 30,000 tones capacity we will be able to receive bigger oil shipments, with a capacity of 50,000 tones, and would ease the way for more foreign companies to operate from the Egyptian marinas,” Hamouda advices.
Consequently, both sources find, among the development needed in the petroleum sector, amending the contracts with the Israeli side. “Egypt needs to set some adjustments to the gas agreement with Israel. Experts expect that the Egyptian side will only be able to export 25% of the original deal, due to the low price that Israel used to pay and to the high local demand,” Hamouda explained.
Whilst, the ministry source said that his wishes go for stopping the gas supply to Israel. “Egypt lost millions in these poor gas deals with EMG and Israel, those millions would have helped the country in the hard economic times after the 25th of January.”
It is to be mentioned that the East Mediterranean Gas (EMG) is owned by Egyptian businessman Hussain Salem, Egypt Natural Gas Co (EGAS), Thailand’s PTT, American businessman Sam Zell, Ampal-American and Israel’s Merhav. EMG supplies 45 percent of the gas needs of Israel’s electric utility.
Hamouda expects that Egypt is going to face the same electricity problem from last year’s summer, “Last summer we suffered from major power cuts and back then we had enough money to buy fuel oil to supply the power stations. This summer we are suffering from economical problems and we don’t have enough currency to replace the exported gas.”
“We need to relook into our natural gas exports and see if we can first meet our local demand then start supplying outsiders.”
“The January 25th came with major changes, but it kept itself white with no damages to the country’s petroleum infrastructure. We need to use this into having a better look for the future of our oil and gas exports, sign better exports deals, and attract more foreign companies into the market with the stability and the safety of the petroleum operation in Egypt,” Hamouda indicated.
As this article being written, news agencies reported that tribesmen prevented technicians from repairing an oil pipeline in Yemen’s central Maarib province that was damaged by explosives earlier. Yemen, which borders the world’s top oil exporter Saudi Arabia, has been hit by weeks of increasingly violent unrest against its President. They also attacked pipelines that ferry crude from Maarib, east of the capital Sanaa, to the Red Sea coast.
The whole world is watching and monitoring the changes in the Middle East and till now, Egypt is succeeding to show responsibility towards the interests of its own and the foreign operating companies on its land, as most of these companies announced that their operations were not affected and they remain in Egypt with more future plans. Stability and safety are two major demands for any international company that operates in the Middle East, and Egypt was able to provide both factors as it is expected from the leader of the Arab world.
By Sama Ezz Eldin