Re-integration of Iran and Libya to the Global Energy Market

The geopolitical factor in the Middle East and North Africa region certainly has a significant impact on the global oil market in this decade – and Libya and Iran are at the top of that agenda. The outcome of the Iran-West negotiation for a long-term comprehensive solution regarding Iran’s nuclear programme will define Iran’s role in the oil market.

Iran currently exports around 1.2 million barrels of oil a day whilst its capacity could reach 4 million barrels a day. In the case of an agreement being made, Iran’s capacity would be boosted by 1 million barrels a day over the next 4 – 5 years.

Such a deal would undoubtedly lower the risks of oil export disruption passing through the Strait of Hormuz, the narrow artery through which 40% of global sea-borne oil exports pass.

Libya’s transitional government is struggling to keep order within its border and this massively affects its oil production. Production tumbled further recently to around 230,000 barrels a day-compared with 1.4 million barrels only last summer. The country has a structural political issue with the Eastern provinces that is preventing exports from that region.
At the core of the dispute are demands in the East for greater political autonomy and a larger allocation of the state’s oil revenue, but the government is struggling to sustain production in the West of the country due to continuous protests. In addition, its production capacity has shrunk by half a million barrels a day compared to 1.7 million barrels a day before the 2011 civil war.

The pace of re-integration for both these countries into the current global market will vary and will remain unpredictable. The outcome of the current Iranian-West negotiations will define the nature of Iran’s role in the global energy market. For Libya, the situation is similar to Iraq – Post the 2003 war and will need considerable international support to maintain security and rebuild its infrastructure to be able to integrate fully.

Other scenarios related to the geopolitics in the region that could have an impact on the global energy market include: The intensification of instability in Yemen or Bahrain, which could disrupt the oil rich East region in Saudi Arabia and the escalation of violence in Egypt and Libya into full scale civil wars which would threaten security of production and supply of oil and gas to the global market.

All these will be discussed by the world’s leading experts at the Global Energy Security Conference taking place on the 12th and the 13th of May in London.

Click here for more information about the Global Energy Security Conference 2014