Libya's Brega Port under siege as guards prevent exports

Libya’s energy sector was dealt another blow on 11 July when a group of protesters from the Oil Facilities Guard closed down the Brega Port and prevented a cargo that was in the port from loading.

The members of the guard are demanding that they be paid their backdated salaries, just as those members of the guard who were blocking the ports of Es-Sider, Ras Lanuf have been paid. One of the guards told the Turkish media on 11 July that “we closed Brega today as they haven’t given us our financial dues for several months. We will prevent all ships from being loaded with fuel. There is a cargo [in the port] and we won’t allow it to load oil until we receive our dues in full.”

Brega, run by the NOC’s Sirte Oil Company subsidiary, is a relatively small port with a 90,000 b/d capacity that has lately been used to supply the Zawia refinery. Its closure is a challenge given the troubles with the eastern oil export terminal ports over recent months and the fact that it will still take a while before operations are back to normal in Ras-Lanuf and Es-Sider, handed over earlier this month.

Given that the protesters are making purely financial demands the situation should be resolved easily enough. Despite this, with the political scene in such chaos and with the economic situation in deep crisis, how long it will take the government to resolve this standoff has yet to be seen.

Meanwhile, workers at the 103 Oil Field 200 km from Ajdabiya and operated by the Zuetina Oil Company stopped working this week. On 9 July the workers began an open sit-in at the field in protest against the company’s board. It is not clear exactly what it is about the board that the workers are protesting about, but they are refusing to leave unless their demands are met.

The good news, however, is that the agreement between the head of the Cyrenaican Transitional Council (CTC) politburo, Ibrahim Jedhran, and the government appears to be holding despite the fragility of the situation on the ground. It was reported this week that foreign workers have returned to work in the oil fields in Jalu and that European companies are restarting their operations.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2014 Menas Associates

Kazakhstan increases crude oil export duty

The Kazakhstan government has increased the so-called ‘export customs duty’ (ECD) on crude oil from $60 to $80/ton. This change will take effect on 1 April, according to economy and budget planning minister Yerbolat Dosaev, who unveiled the new export tariff at a ministerial meeting.

The ECD increase should boost this year’s projected government revenue by $2.7 billion. The economy ministry has added $1.6 billion to this total in the form of extra tax income to be derived from the exporting industries’ future profits, which are widely expected to ameliorate after the 20% devaluation of the tenge in February 2014.

The ECD was introduced in May 2008 at the rate of $110/ton at a time when international oil prices were as high as $125/barrel. It was argued that the new duty would enable Kazakhstan to benefit fully from increasingly favourable conditions on global markets as well as its expected stabilising domestic effect.

In January 2009, however, the government scrapped the ECD after oil prices had fallen from their historic highs. As the global market stabilised the ECD was re-introduced in August 2010 at the rate of $20/ton. This was applied to all Kazakhstan-based oil exporters except those whose production-sharing agreements guaranteed stability of the customs regime. In January 2011 the ECD was increased to $40/ton and then again to $60 in April 2013.

The government plans for at least 6% GDP growth by the end of 2014, while also containing annual inflation below a 6–8% cap. The benchmark oil price that serves as the basis for all income and expenditure forecasts has also been increased, from $90 a barrel to $95. Some local analysts have already expressed their scepticism about the latter benchmark, given the possible impact of the crisis in Ukraine on future global oil market stability.

Earlier this month the US administration announced its intention to release around 5 million barrels of crude to the market and cited the need to test the sustainability of the US oil infrastructure after a recent surge of domestic production. Some have seen this, however, as a calculated move as part of Washington’s efforts to punish Moscow for its combative stance on

Ukraine’s Crimea peninsula.

While this quantity is clearly too small to have any significant impact on oil prices, expanding US domestic production may upset both Russia’s and Kazakhstan’s medium- to long-term price expectations.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2014 Menas Associates

Nigeria: Power reforms need funding

The Nigerian federal government has approached the Islamic Development Bank (IDB) for a $450 million loan to fund on-going power sector reforms. The request was made by Vice-President Namadi Sambo earlier in the month in Mecca, Saudi Arabia, when bank president Ahmed Ali paid him a courtesy visit.

The vice-president, who chairs the power sector reform committee, had been in Saudi Arabia for Umrah, the lesser Hajj during the fasting month of Ramadan.
 

Sambo informed the IDB president that Nigeria still required about $450 million to augment transmission in an on-going power sector reform that is targeting the generation of 20,000 MW of electricity. He also solicited the support of the bank in financing other projects beneficial to Nigeria, such as the construction of a highway linking Lagos State, the commercial hub of the country, to Abidjan, the capital of Côte d'Ivoire.
 

Ali noted that his visit was a reinforcement of the cooperation between IDB and Nigeria, stating that his organisation had already approved three of the five projects for which the country recently sought funding. The other two are still being considered.
 

The approved projects are the $17.9 million construction of four science-specialist secondary schools, a $43.15 million 330-bed capacity specialist hospital, and the $81 million Zaria water project.
 

All the projects are based in Kaduna, northwest Nigeria. Their location has raised quite a few eyebrows, in view of the fact that Sambo is a former governor of the state.
 

Some of the projects, such as four secondary schools, are also considered rather pricy in the opinion of a local quantity surveyor. The $81 million project to improve the water supply across the Zaria metropolis also raises a red flag: the project has been underway for several years but remains incomplete in spite of the funds that have gone into it. Some have called for an investigation.
 

Multiple sources claim that a company owned by the vice-president is involved with the project and has been working on several components of it, dating back to the 1990s.
 

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2013 Menas Associates