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Libya's oil output cut by up to 75%

Published 1:33 AM, 25 Feb 2011 Last update 7:13 AM, 25 Feb 2011


QUICK SUMMARY | FULL STORY | OIL

Reuters

ROME - Turmoil in Libya has cut its oil output by 75 per cent or 1.2 million barrels per day, Italian oil company ENI said, but the West's energy watchdog said the reduction in supply may be much lower.

Oil surged on Thursday to near $US120 a barrel because of the disruption to output in Africa's third-largest producer, even though leading OPEC producer Saudi Arabia has said it is willing to make up for any shortages.

 

ENI Chief Executive Paolo Scaroni said the unrest in Libya had both cut production and triggered speculation in the market. ENI is Libya's biggest foreign oil operator and has had to cut some Libyan output, as have a number of rivals.

"Naturally there is speculation which is amplifying a real phenomenon. The real phenomenon is there are 1.2 million barrels less on the market which is not a huge thing, but it is something and there is also a sense of general uncertainty in the region which can be the trigger for speculation," he told reporters in Rome.

A spokesman for ENI later clarified that Scaroni's remarks indicated Libyan daily output had fallen by 1.2 million barrels.

ENI's estimates were three times more than previous figures given by oil companies and industry sources, which had indicated more than 400,000 bpd of Libyan output had been stopped, according to Reuters calculations.

The north African OPEC member normally produces about 1.6 million bpd of high-quality oil, or almost 2 per cent of world output. About 1.3 million bpd is exported, mainly to Europe.

Mr Scaroni also said the unrest had more than halved Eni's Libyan gas and oil production, cutting it to 120,000 barrels of oil equivalent per day (boepd) from 280,000 boepd normally.

Contacts difficult

Other estimates put the disruption to world supply at far less.

The International Energy Agency said in a statement it estimated between 500,000 and 750,000 bpd of crude, less than one per cent of global daily consumption, have been removed "at present" from the market.

The agency, an adviser to 28 industrialised countries, did not specify Libya in its statement. It again called on OPEC to draw on its excess oil production capacity if required.

Oil firms are struggling to find out the extent of the disruption because they cannot get through to their offices and operations in Libya.

"Contacts with our people are very difficult. The internet is down and phone lines are not working," said one company source. "Part of our output, not all, is shut. They are checking what the situation is exactly."

Libyan oil officials could not be reached. Shokri Ghanem, head of the National Oil Corporation and Libya's top energy official, was not available on Thursday to comment.

Oil surged more than 7.5 per cent to its highest since August 2008 on Thursday.

"Certainly the Libyan crisis is playing a role in this sudden surge in prices but this has no bearing on the security of supplies," Mr Scaroni said.

He said oil prices would fall below $US100 a barrel if the international situation normalised.

Austria's OMV said on Wednesday it might be heading for a full production shutdown in Libya. Total, Repsol and BASF have also said they are either slowing or stopping output.

Repsol said on Thursday it was still producing in Libya although gross production at blocks it is involved in had been reduced to 160,000 bpd from 360,000 previously.

US companies produce more than 100,000 bpd from Waha fields and consortium member Occidental Petroleum said output continued.

Saudi Arabia in talks to fill gap

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, senior Saudi sources said.

Oil industry sources said Saudi officials have been in touch with Spanish and Italian oil firms -- among those hit by the Libyan shutdowns. The companies were assessing their needs and have yet to ask for any more Saudi oil.

The Saudi sources said Saudi Arabia was able to pump more of the kind of high-quality crude produced by OPEC member Libya and that it could be shipped quickly to Europe with the help of a pipeline that crosses the kingdom.

Oil prices have surged towards $US120 a barrel because of the unrest and disruption to supply in Libya. Refineries in Europe import about 80 per cent of Libya's 1.3 million barrels per day (bpd) of exports, analysts say.

"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.

"Some OPEC countries have started looking at ways to divert their crude to Europe."

Analysts have said the loss of virtually all Libya's production is particularly serious because it is high-quality and easy to refine, in contrast to the heavier crudes often associated with OPEC countries.

But the Saudi sources said the kingdom had the right kind of crude available.

"Saudi is willing and capable of supplying oil of the same quality, either Arab Extra Light or through blending," one of the sources said.

Quality issues

Industry sources said European oil companies have yet to ask for more Saudi oil and were also doubtful whether Saudi crude would be a suitable alternative because of quality differences.

Spain's Repsol and Italy's Eni are among the oil companies working in Libya that have had to slow or shut their Libyan oil output.

"If you need, ask and we will consider it," an industry source said Saudi officials had told his company. "We are evaluating the situation at the moment. It is not a matter of quantity, more of quality."

While Saudi Arabia had indicated a willingness to supply extra oil, it has not specified the particular crude grades that may be on offer or the quantities, or how long any arrangement to pump more would last.

"There is nothing very concrete," said one of the industry sources.

Another industry source said Saudi Arabia had large amounts of light crude, although he added state oil company Saudi Aramco had not yet issued new instructions to increase the rate of pumping.

For European customers, the advantage of Libya is that it is only a short journey away across the Mediterranean.

The Saudi sources said Saudi Arabia could shorten the journey time for its crudes by shipping them through its East-West pipeline and then to the Mediterranean and on to Europe.

Some West African OPEC crude, such as from Angola could also be redirected to Europe, the sources said, while Saudi Arabia temporarily could send extra oil to Asia to compensate.

Despite the Saudi moves, OPEC has yet to make any changes to its formal output policy.

Saudi Arabia said at talks this week the oil market was still adequately supplied, but it was always ready to tap some of its roughly 4 million bpd of spare capacity on to the markets in the event of a shortage.

The kingdom and other members of OPEC -- some of whom have smaller amounts of unused capacity -- have held bilateral talks with big customers this week and EU sources said European Commission experts were in contact with OPEC.

OPEC has held its formal output policy steady since December 2008 when it agreed to a record supply curb of 4.2 million bpd. As prices and demand have risen, OPEC has unofficially increased the amount it produces.

Gaddafi makes fresh speech, appeals for calm

Muammar Gaddafi blamed a revolt against his rule on al Qaeda leader Osama bin Laden, and said the protesters were fuelled by milk and Nescafe spiked with hallucinogenic drugs, in a rambling appeal for calm.

Gaddafi, who just two days ago vowed in a televised address to crush the revolt and fight to the last, had none of the fist-thumping rage of that speech.

This time, he spoke to state television by telephone without appearing in person, and his tone seemed more conciliatory, with much of his country out of government control.

"Their ages are 17. They give them pills at night, they put hallucinatory pills in their drinks, their milk, their coffee, their Nescafe," said Gaddafi.

After the speech, protesters in the eastern city of Benghazi, which is now out of Gaddafi's control, took turns in stamping on a photograph of him which was placed on the ground.

"This is the speech of a dead man," said Said el-Gareeny, a 35-year-old engineer. "He is trying to divide us, but we are one nation," Seraj Bensiriti, 25, said. "After 42 years of slavery, this is over. The bloodbath must end."

"Gaddafi is going through the phases of depression. Went from denial to anger to bargaining. Next speech will be depression." said Iyad el-Baghdadi on Twitter.

In the address, Gaddafi referred to the uprisings in Egypt and Tunisia that deposed their leaders.

"They are criminals ... is it logical that you let this phenomenon continue in any city? ... We do not see what is happening in Egypt and Tunisia happening in Libya, ever!"

"Those (in Egypt and Tunisia) are people needing their governments and they have demands; our power is in the hands of the people," he said, a typical reference to his idiosyncratic rule, which he says is based on giving power direct to the people.

Points at bin Laden

Gaddafi, battling to preserve his 41-year rule and his "Third Universal Theory", outlined in his "Green Book", offered condolences to those killed in the bloodshed and called for calm among people he said were fighting among themselves. Saying bin Laden was "the real criminal", Gaddafi urged Libyans not be swayed by the al Qaeda leader.

Libyan authorities tend to group anyone who challenges the ruling system under the umbrella of al Qaeda, and anyone accused of association with the group is likely to face extrajudicial punishment.

"Bin Laden ... this is the enemy who is manipulating people," Gaddafi said, adding: "Do not be swayed by bin Laden."

"From a national, moral, ethical standpoint ... they should stop. I have no authority stemming from laws or decisions or anything else, I just have moral authority. I only have moral authority," he said.

Gaddafi has long sought to present himself as figurehead of a revolution that is led by the people, rather than a traditional executive head of state.

"No sane person" would join the protests against his rule, Gaddafi said, calling on citizens to disarm those who were protesting.

"Remember in the Iraq war: the United States and Britain said they had reason to intervene. Qaeda and the international terrorists work together ... Saddam Hussein had a relationship to al Qaeda ... look what America did," he said.

Referring to violent clashes taking place in the town of Zawiyah, about 50 km (30 miles) from the capital Tripoli, Gaddafi said: "What is happening in Zawiyah is a farce ... Sane men don't enter such a farce."

"You people of Zawiyah, stop your children, take their weapons, bring them away from Bin Laden, the pills will kill them," he said. "Leave the country calm."

UK urges action, EU considers intervention

Britain urged the world to exert greater pressure on Libyan leader Muammar Gaddafi and the European Union said it was considering sending a humanitarian intervention force to the country.

British Foreign Secretary William Hague called for an international investigation into Libyan state violence, while Gaddafi's forces stepped up their week-long struggle to crush protesters wanting to end his 41-year rule.

The international community must "increase the pressure on a regime which by all accounts is now committing serious offences," Hague told BBC Radio.

He said atrocities had taken place and the odds against Gaddafi's political survival were lengthening.

"We will be looking for ways to hold to account the people who are responsible for these things ..." he said. "We will want some kind of international investigation."

Britain's Defence Secretary Liam Fox said his country had been discussing with the head of NATO how better to coordinate ways of getting people from a number of different countries out of Libya over the next few days.

The British government has been heavily criticised at home for being slow to evacuate Britons from Libya, its rescue operations lagging those of other European countries.

Apology

Prime Minister David Cameron apologised for the delay.

"Of course I am extremely sorry," Cameron told the BBC. "There are ... lessons to be learned from this ... right now, the priority has got to be getting those British nationals home".

In Brussels, senior officials said the European Union was weighing a range of options to evacuate 5,000-6,000 EU citizens still in Libya, many of them oil company employees, and said one possibility was a military humanitarian intervention force.

"We are in contact with EU member states to see whether their facilities, civilian and military, can be deployed for this (evacuation of EU citizens)," a senior EU official said.

The United States is also looking to work more closely with the EU over Libya.

A high-level British government crisis committee met to discuss the crisis, including how to evacuate 170 British oil workers from remote desert camps in Libya. Some have appealed for help after looters seized their vehicles and supplies.

Sky News quoted sources as saying the Special Boat Service, a special forces unit, was on stand-by for a possible rescue mission to Libya, but the government declined comment.

Fox said a military rescue operation would depend on the situation on the ground.

"If we can move people by road and get them into Egypt or alternatively into Tunisia by road that is clearly less hazardous," he said in a pooled TV interview.

"It's very difficult to know what some of the air defences for example would be in Libya. We have to minimise the risk for our armed forces at the same time as trying to ensure the maximum safety for UK citizens."

The Foreign Office said a British Navy frigate, HMS Cumberland, had docked in the Libyan port of Benghazi and had picked up more than 100 Britons. Three flights carrying Britons left Tripoli on Thursday, it said.

The EU said it was working with the United Nations, Japan, the United States and others to ensure help was coordinated.

 

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