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Oil Price

Libya: yet another (peak) oil war

What started as an uprising against Gaddafi has turned into a quagmire including NATO intervention in which oil plays a dominant role. The outcome is uncertain and it is not clear whether there will be even a “winner” in this conflict. What is certain is that Libyan oil production and exports won’t come back to previous levels any time soon, thereby testing Saudi Arabia’s capacity to replace Libyan oil for more than just a short period. We are also getting a foretaste of what is to come in the fight for the 2nd half of oil.

Libya_Refinery

Libya’s oil: the prize at stake – but is it worth so many lives?

One of the root causes for this tragedy and loss of life is the West’s addiction to oil which necessitated to court Gaddafi for Libya’s oil in what is called the “Gaddafi rehabilitation”. This lead to an unnecessary prolongation of his repressive system which caused the uprising. Symbols of oil addiction are of course autostradas, autoroutes, autobahns, motorways, interstates, tollways and road tunnels. And business as usual continues despite all the signs that oil supplies from the Middle East are threatened. In Sydney, for example, Infrastructure Partnerships Australia – as if living on a different planet – has just given the toll-way mafia a completely unjustified Excellence Award for the M2 widening, years ahead of its completion, not to mention any commercial success which is now more than in doubt.

thumb-l-odyssee---resume-et-episodes-mythologiques-1415

Will “Odyssey Dawn”, as the US is naming their campaign after a Greek epos, be the start of a 10 year adventure in the fight for oil?

Controlled by intriguing Gods and going astray on an uncertain voyage?

“It takes Odysseus 10 years to reach Ithaca after the 10 year Trojan War…..

The citizens of Ithaca have followed Odysseus on the road, planning to avenge the killing of the suitors, their sons. Their leader points out that Odysseus has now caused the deaths of two generations of the men of Ithaca: his sailors, not one of whom survived; and the suitors, whom he has now executed. The goddess Athena intervenes and persuades both sides to give up the vendetta”

http://en.wikipedia.org/wiki/Odyssey

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This must have been the straw which broke the camel’s neck:

Eni, Repsol risk expulsion from Libyan oil fields after Gaddafi’s advance

18/3/2011

Muammar Qaddafi may expel western energy companies from Libya should he snuff out the month-old armed rebellion against his regime, draining money from the economy and hurting exporters such as Eni SpA (ENI) and Repsol YPF SA. (REP)

Qaddafi, 68, took control of Ras Lanuf and Brega oil facilities and moved near Benghazi, the center of the rebellion, as the United Nations Security Council voted to establish a no- fly zone over Libya.

Italy_imports_from_OPEC_1984_2010Gaddafi-and-Berlusconi-handshake

His threat to bring China into the energy business that Italy has enjoyed for five decades may reshape the economic map of the country holding Africa’s biggest oil reserves.

Even without outright expropriation, a Qaddafi victory may lead to Western sanctions that would roll back almost 10 years of European and U.S. investment in Libya. The 2004 reprieve from two decades of trade restrictions allowed companies such as BP Plc (BP) and Royal Dutch Shell Plc (RDSA) to invest in Libyan fields, boosting output to about 1.6 million barrels a day, most of which was sold to Europe.

http://www.bloomberg.com/news/2011-03-17/qaddafi-advance-poses-eni-expulsion-risk-from-libyan-oil-fields.html

And these are excerpts from the UN resolution 1973 (2011) on protection of civilians, flight bans and freeze of assets (17/3/2011):

4.   Authorizes Member States that have notified the Secretary-General, acting nationally or through regional organizations or arrangements, and acting in cooperation with the Secretary-General, to take all necessary measures, notwithstanding paragraph 9 of resolution 1970 (2011), to protect civilians and civilian populated areas under threat of attack in the Libyan Arab Jamahiriya, including Benghazi, while excluding a foreign occupation force of any form on any part of Libyan territory, and requests the Member States concerned to inform the Secretary-General immediately of the measures they take pursuant to the authorization conferred by this paragraph which shall be immediately reported to the Security Council;

6. Decides to establish a ban on all flights in the airspace of the Libyan Arab Jamahiriya in order to help protect civilians;

19. Decides that the asset freeze imposed by paragraph 17, 19, 20 and 21 of resolution 1970 (2011) shall apply to all funds, other financial assets and economic resources which are on their territories, which are owned or controlled, directly or indirectly, by the Libyan authorities,…..”

Annex II: Asset Freeze

5   Libyan National Oil Corporation Under control of Muammar Qadhafi and his family, and potential source of funding for his regime

http://www.un.org/News/Press/docs/2011/sc10200.doc.htm

Para 19 could mean an oil embargo as discussed here:

“The non-military measures amount to a significant tightening of sanctions on the Libyan regime, including an assets freeze on all Libyan government organisation and those indirectly controlled by the government (which would also presumably include Libyan oil companies – highly significant if so: effectively an oil embargo”

http://www.carneross.com/blog/2011/03/18/libya-rough-guide-new-un-security-council-resolution-1973

Oil statistical context

UK crude oil production from offshore fields peaked in 2000,  just one year after Colin Campbell warned the House of Commons on peak oil. The North Sea oil peak including Norwegian oil production followed in 2002. This necessitated looking for new sources of oil.

UK_crude_oil_production_1976_2010

The 1st peak oil war was the Iraq war in March 2003. The objective was to get at Iraq’s pre-peak oil and push the global peak a couple of years into the future. The following graph is from a slide show presented by PFC Energy to the Centre for Strategic and International Studies in Washington in April 2004.

OPEC_depletion_levels_2003_2010

<< PFC depletion levels in % of original reserves (end 2003) updated by adding cumulative crude oil production 2004-2010, while keeping  implied original reserves unchanged  (new discoveries and/or enhanced oil recovery since then could mean that actual depletion levels could therefore be a bit lower)

The graph shows the low depletion level in Iraq, caused by 2 decades of underproduction, first in the 1980s during the Iran-Iraq war and then in the 1990s during the “Oil for Food” sanctions imposed by the UN. They could only be lifted after the removal of Saddam. What the graph also shows is the remaining oil above the columns. Given what is happening in Libya and elsewhere in the Middle East, it should dawn on governments what fights lie ahead to get at that oil.

As we know, the dash for Iraq’s oil was not very successful. In March 2004, just a year after the Iraq war, Tony Blair shook hands with Gaddafi:

Tony_Blair_Gaddafi_handshake_March_2004

http://www.ft.com/cms/s/0/198e48b4-411a-11e0-bf62-00144feabdc0.html#axzz1HTb91Tnm

He [Blair] praised the “full and transparent co-operation” that Libya had given on dismantling its nuclear programme and its chemical and biological weapons, and he listed other areas, including the armed forces, education and oil extraction, in which he expected ties between the two countries to grow.

http://www.timesonline.co.uk/tol/news/article1051488.ece

But the oil outcome was again poor for UK oil imports as the following graphs show:

UK_crude_oil_imports_2000_2009UK_crude_oil_imports_2000_2009_excl_Norway

In effect, Libya just replaced UK’s vanishing imports from Saudi Arabia.

UK_crude_oil_imports_Libya_Saudi_Arabia

The UK Energy Research Centre calculated that a speed limit of 60 mph on UK’s motoways could save 1.94 mt of CO2 pa, equivalent to 0.6 mt pa of crude oil. UK’s crude oil imports were 1.872 mt in 2009. Therefore, it would take more than just reduced speed limits to replace Libyan oil imports.

http://www.eci.ox.ac.uk/research/energy/downloads/qh2-limitingspeed.pdf

Apparently, governments rather embark on war adventures than educating their motorists for a change of behaviour, like car pooling, which has to come anyway.

Related links and further reading:

24/2/2011   Libya exports 7% of crude from Mediterranean and Middle East
http://www.crudeoilpeak.com/?p=2633

23/2/2011   Quick primer on Libyan oil
http://www.crudeoilpeak.com/?p=2621

22/3/2011    Foreign Correspondent: Monster Makeover

http://www.abc.net.au/foreign/content/2011/s3170776.htm

Deakin University Middle East Studies:  “In the Green zone: 40 years with Colonel Gaddafi”

http://www.deakin.edu.au/arts-ed/sips/staff-directory2.php?username=totmans

18/3/2011    The Hills M2 Upgrade project has been named the 2011 winner of the Government Partnership Excellence Award at the National Infrastructure Awards, announced last night by Infrastructure Partnerships Australia (IPA)

http://www.transurban.com/110318_Hills_M2_Upgrade_wins_major_award_for_government_partnership_-_FINAL.pdf

Some signs of hope come from Melbourne:

The Baillieu government will this year begin planning work on a railway line to Doncaster, first promised by conservative Premier Henry Bolte in 1969.

Premier Ted Baillieu has promised the railway line will be built along the Eastern Freeway’s median strip, with an expected impact on the amount of traffic along the connecting Hoddle Street.

The Doncaster study will not be completed until 2013, Coalition costings in the lead-up to November’s election show.

http://www.theage.com.au/victoria/4m-hoddle-street-plan-shelved-20110321-1c300.html

2013 is of course too late. But better too late than never.

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