Oil price rises on blockade of Libya’s major oilfields; here are the implications for the Nigerian economy
Global oil market responded to the escalating crisis in Libya on Monday after a proposed peace talk, intended to bring the shutters down on the country’s near decade civil war fell Met a brick wall.
World leaders had gathered in Berlin on Sunday to hash out a ceasefire in Libya but Khalifa Haftar, the country’s eastern commander launched a shutdown of Libya’s major oilfields instead, throwing the nation to its lowest production level since the build-up to Muammar Gaddafi’s slaughter in 2011.
Beyond the impact of the Libyan conflict on oil prices, reports say that some output in Iraq was shut down also, suggesting that the rise in oil prices might be sustained in the next few days.
Global oil prices’ vulnerability to geopolitical tensions surfaced for the second time this year, the first being the escalation of the US-Iran crisis in the aftermath of the assassination of Iranian top commander, General Qasem Soleimani on 3rd January.
Brent crude, spiked to $66 a barrel on Monday, its highest in almost two weeks, before easing at $65.20.
Peaking at $59.73, also its highest in about the same period, West Texas Intermediate (WTI) later settled at $58.66.
Haftar had ordered a closure of several ports last week notably the $300,000 barels per day (bpd) Sharara reputed to be the largest oilfield in Libya, itself the country with the biggest proven oil reserves on the continent.
There is a balance of interest from the west in the country’s two opposing sides as a strategic positioning for the control of Libya’s energy resources.
Haftar has the backing of Vladimir Putin’s Russia, who has being an active player in the campaign for oil cut in recent times.
Fayez al-Sarraj, Libya’s internationally recognised prime minister, is a sweetheart of Turkey, who are providing military aid in the form of training to forces loyal to al-Sarraj as well as to Syrian rebels who have joined the hostility.
As the United Nations move to broker a ceasefire in few days ahead, the battle for the soul of the oil-rich nation remains uncertain as Haftar has already mustered support from the Arab world following the backing it has received from both Egypt and the United Arab Emirates (UAE).
The reverberations of Haftar’s defiant gesture of rejecting the truce deal arranged by world leaders are most resonant in the likely massive fall in Libya’s oil output which Bloomberg report said could fall to 72,000 bpd from 1.2 million “once its storage tanks are full.”
Haftar’s ambition in placing a blockade on oil production was a ploy to weaken al-Sarraj’s military strength to the barest minimum by denying him access to oil money, the main source of purchasing arms and ammunition and running the business of governance.
The surge in oil price will spur a concomitant increase in Nigeria’s external reserves. Brent crude, against which Nigeria’s Bonny Lite is benchmarked, has been on an upward movement, meaning that Nigeria’s crude oil earnings will swell further if the trend is sustained.
Libyan state oil firm NOC has declared force majeure on oil exports from the eastern ports of Brega, Ras Lanuf, Hariga, Zueitina and Es Sider, a statement said on Monday.
The NOC said forces loyal to Khalifa Haftar, who controls eastern Libya, had ordered the closure of the oil ports, which will result in loss of 800,000 bpd in oil output.
The United Nations mission in Libya has expressed deep concern over the disruption and urged all sides to exercise restraint.
“This move would have devastating consequences first and foremost for the Libyan people who depend on the free flow of oil for their well-being,” the mission said.
The closure of oil ports has been defended by a spokesman of Libyan forces loyal to eastern-based commander Khalifa Haftar
Spokesman Ahmed al-Mismari said the closure of the ports is “a huge step” by the Libyan people.
“The Libyan people are the ones who closed the oil ports and fields, and prevented oil exports.” He added “ we have to protect our people … and not allow anyone to threaten the Libyan people.”
The Secretary to Government of the Federation, SGF), Mr Boss Mustapha, has revealed that Nigeria targets to secure a position among the first 70 by 2023 in World Bank Ease of Doing Business ranking.
According to the News reports, Mustapha stated this at the ‘Night with Maritime Stars’ of the Nigerian Maritime Administration and Safety Agency (NIMASA) Corporate Dinner and Merit Awards in Lagos on Friday.
The SGF, who was chairman of the occasion, said that currently, the country had moved up from 170 to 131, after President Muhammad Buhari signed the Presidential Enabling Business Environment Council (PEBEC) in July 2016.
He expressed optimism that with the PEBEC initiative, the 2023 target would be achieved.
Mustapha said that the government, in its bid to improve efficiency and productivity in the industry and country, had created the council to ensure an enabling environment for port efficiency.
“Government will continue to support the maritime sector because on it rests opportunities for wealth creation and economic growth,” the SGF said.
He said that there was still a long way to go, but there was a need to recognise the progress that had been made so far.
The SGF pointed out that the progress made so far by NIMASA was due to the commitment and drive of its staff and stakeholders in the industry, hence the need to appreciate them.
He urged the members of staff that were not recognized at the event to strive hard, for tomorrow could be their time.
In his welcome remarks, the Director-General of NIMASA, Dr. Dakuku Peterside, observed that since the introduction of the NIMASA annual staff commendation awards three years ago, the image and perception of the agency had been transformed.
Dakuku highlighted some of the achievements of the agency to include the introduction of the final billing system, annual maritime forecast, improved ship registry, increased ship tonnage, among others.
He attributed the achievements to the commitment of the members of staff at the agency.
According to him, this is the reason for celebrating outstanding as well as long-serving officers.
The NIMASA boss said that there was, however, still work to be done in order to build on the modest achievements.
He said that industry players had been a source of strength for the agency with the robust support they had given.
Long Service Award, 68 staff members were recognised for 25 years in service, 34 for 20 years and 69 for 15 years.
For Industry Stakeholders Merit Award, the Most Compliant International Ship and Port Facility Security (ISPS) Onshore Facility 2019 went to APM Terminal, while Best Terminal/Jetty Operator 2019 went to Tincan Island Container Terminal.
The Best Maritime Training Institution 2019 went to Maritime Academy of Nigeria, Oron.