A free Libya may choose not to export oil to international markets but instead to use it at home. Image: mshamma via Flickr.
With the sudden collapse of the Qaddafi regime in Tripoli, the oil industry is hoping it can repair enough of Libya’s damaged export terminals, pumping stations and pipelines to get as much as one million barrels a day of oil flowing into the market within the next six to 12 months.
But as I have argued before in this blog, regime change in the Middle East has seldom been bullish for energy exports.
If you want a recent example from the Arab Spring, just ask the Israelis or the Jordanians about their supply of natural gas. Israel and Jordan used to get 40% and 80% respectively of their natural gas from Egypt via a pipeline that goes from El-Arish, Egypt to Ashkelon, Israel, and then eventually to Jordan. That is until Egyptian strongman Hosni Mubarak was overthrown. It didn’t take long before the pipeline and pumping stations were repeatedly blown up, which would have been unthinkable during the Mubarak regime.
Needless to say, the pipeline, which opened in 2008 following a 20-year agreement that Egypt signed in 2005 to supply Israel with natural gas, was not exactly a vote getter on the Arab streets. Rumors abounded about secret payoffs to the Mubarak family.
In Mubarak’s Egypt, however, it didn’t matter whether the vast majority of Egyptians were opposed to selling natural gas to Israel any more than it would have mattered what the vast majority of Egyptians might have thought about anything else.
The law of unintended consequences
But the supply disruption may have some unintended consequences. For one, it is spurring Israel, which has always lacked its own hydrocarbon resources, to develop its giant Leviathan natural gas field, as well as other recently discovered gas fields in the Mediterranean as quickly as possible. So the bigger winner here is Israel’s energy industry.
The impact on Jordan, an Arab neighbor and historic ally, may be even more problematic for Egypt. The loss of Egyptian natural gas supply may drive Jordan into the arms of a patiently waiting Iran, which has opportunistically offered to replace Egypt as the country’s natural gas supplier. As is the case elsewhere in the world, energy links usually sprout political ones so the big winner here, both commercially and politically, will be Iran.
Egyptians, of course, have every right to sell their natural gas to whomever they choose. But before counting on burning another million barrels a day or so from Libya, Western oil consumers might want to consider what has happened to the flow of natural gas in post-Mubarak Egypt. Giving the people a say in the management of their country’s hydrocarbons doesn’t mean they will necessarily choose to export more of that fuel to you.
Cross-posted from Jeff Rubin’s Smaller World.
– Jeff Rubin, Transition Voice
About Jeff Rubin
One aspect that hasn’t been discussed is how long it took for the outside world to go “full in” on this war.
We can debate the political ramifications until the cows come home, but the bottom line was that the oil companies weren’t sure which side would produce oil for them if they made a choice, and whether difficulties in Libya would increase the price of Texas crude enough to justify removing LIbya profits from the equation.
Gaddafi could have been taken out at any time, but having the technology and/or the will is irrelevant in a world that makes all of its decisions based on what the talking money says.