Oil production recovered faster than expected from the “Arab spring” of 2011 – but the delayed impact of the revolutions that swept across north Africa is now hurting supply growth forecasts for Libya, Algeria and Nigeria.
The delayed impact of the Arab spring is important for global supplies and also for the internal politics of Opec, the oil cartel, as fewer barrels from its African members could give more room for surging production from Iraq.
The International Energy Agency anticipates that oil production from Africa’s Opec members Algeria, Angola, Libya and Nigeria will stagnate over the next five years at 7.12m barrels a day, posting virtually zero growth from 2012 to 2018. Last year, the agency anticipated supply growth of 685,000 b/d from 2011 to 2017.
Antoine Halff, head of markets at the IEA in Paris, said that at first the Arab spring of 2011 looked like a blip as production recovered quickly from the war in Libya. “But it turns out it is a big event,” he said. “We are beginning to see security issues in north and west Africa and this will have implications for Opec supply,” Mr Halff said during the agency’s presentation of its oil market medium-term outlook report.
The IEA is particularly bearish about Algeria, forecasting that oil production capacity will drop from 1.2m b/d last year to 0.8m b/d by 2018. The rest of the African members of Opec will see their production capacity stagnating, instead of posting significant growth as the IEA was forecasting only a year ago.
This bearish outlook for Opec’s African members comes on the back of higher security risks in the wake of the Arab spring, uncompetitive fiscal terms, challenging local content requirements and contract sanctity concerns.
“Increased violence by Islamist extremists and militants, against a backdrop of political instability across much of northern and west Africa since the Arab spring, is changing the equation for acceptable risks for international oil companies,” the IEA adds.
The attack on the In Amenas gasfield in Algeria in January has, in particular, prompted international oil companies to review how they operate in Northern Africa. The recent spate of violence in Libya, targeting the oil industry, has further raised the alarm in the industry. “The situation [in Libya] is deteriorating quickly,” says the chief executive of a major oil company with assets in the country.
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