Algeria natural gas plant takeover is bad news for region's energy

A Libyan defense force charged with making sure the nation's oil sector is secured said it was strengthening its lines along the western and southern borders given regional instability. A decision to use force to help ensure the territorial integrity of Mali, to Libya's south, prompted al-Qaida militants to storm a natural gas facility near the Algerian border. Libya's own energy sector is trying to recover from civil war in 2011 and oil production has since rebounded to close to pre-war levels. Libyan oil production was halted during NATO-led conflict, forcing a brief spike in crude oil prices. Should the Sahel descend into further chaos, the coming wars may be more than the international markets can handle.

France, the former colonial power, responded to a Malian request for military support to help thwart the advance of rebels from the lawless north of the country. Those rebels, some of which had fought in the Libyan conflict, claimed authority over the north of Mali after an early 2012 political coup in Bamako. The Malian conflict has since paralleled the NATO response in Libya, with African, U.S. and British engagements expected to some degree. In response, Algerian militants aligned with al-Qaida in the Islamic Maghreb stormed the In Amenas natural gas complex in eastern Algeria, seizing Western and Algerian employees there in one of the worst hostage situations in years.

"Due to the events in the region, the Petroleum Faculty Guard has taken a series of actions to enhance and reinforce the protection of oilfields, faculties and employees in the west and south region of Libya," the statement from the Libyan force read.(Relevant Article: Algeria Hostage Crisis - Look to Mali for Answers)

According to the latest monthly report from OPEC, Libyan oil production as of December is about 120,000 bpd shy of its pre-war output level of 1.6 million bpd. Last month, Eni's CEO Paulo Scaroni gave the Libyan energy sector an $8-billion vote of confidence with plans for new exploration in the country over the next 10 years.  The Italian government was one of the first to recognize an interim government in Libya during the war and Eni is now responsible about 30 percent of the country's energy production. 

But Libya is far from secure in its own right. U.S. Secretary of State Hillary Clinton next week faces Senate leaders to answer questions about deadly September attacks on the U.S. consulate in Benghazi. Last week, the Italian government announced it was suspending its diplomatic operations there after its envoy, Guido De Sanctis, was shot at while leaving the grounds of the Italian consulate in the coastal city. He was unhurt in the attack.

Though Eni's pledge could be seen as a testament of faith in Libyan reconstruction, what seems to be the fallout from civil war and subsequent NATO intervention is taking a regional toll.  It's not money that Libya needs, but a full-fledged overhaul. Without stable internal and border security, not to mention a durable government, its own petroleum future remains in doubt. For countries like Italy, that could spell trouble given the dominant status that Libya has among OPEC states. (Relevant Article: China's Friendship with Africa - Just a Ploy to get its Natural Resources?)

Algeria, meanwhile, ranks third among African countries in terms of oil reserves, behind Libya and Nigeria, with an estimated 12.2 billion barrels of proven oil reserves. The potential for natural gas, meanwhile, is even more promising, with an estimated 159 trillion cubic feet of proven reserves. Should Algeria go the way of Libya, or Mali, at least 60 percent of the country's budget is at risk from terrorist attacks.

U.S. Defense Secretary Leon Panetta said Friday from London that groups like AQIM have "no place to hide" in the Sahel. His comments came amid word that some of the militants involved in the Algerian hostage crisis may have crossed the border from Libya.

The International Energy Agency, in its monthly report for January, raised its demand forecast for oil by 240,000 bpd to 90.8 million.  Though U.S. military doctrine has started a slow pivot to Asia, the oil economies of the Middle East and North America are now far more important than they ever were before.

Source: http://oilprice.com/Geopolitics/Africa/Why-This-is-All-Libyas-Fault.html