It has been nearly a year since the Libyan port system was closed off by federalist rebels and only just now has it been re-opened. Joining the restart of activity in the ports, the transport of crude oil is beginning to resume and both revenue streams will allow the country to rebuild its economy. As a result, according to Platts, it is predicted that there will be a considerable increase in Mediterranean Aframax freight rates.
Both Ras Lanuf and Es Sider have re-opened and the first oil shipment was loaded at the Ras Lanuf port on board the oil tanker Gemini Sun. This shipment of oil was charted by OMV, the Austrian energy group on the 12th August. Even with the cooling of security tensions, the owners are still feeling a threat strong enough to be cautious of calling at the Libyan ports.
Libya's National Oil Corporation (NOC) state 450,000 barrels of oil are being produced per day by Libya as it stands and it is predicted that by the end of the month that figure will double.
"The Atlantic market is currently so well supplied that incremental Libyan barrels are reportedly having a hard time finding buyers." This statement was included in the monthly report published by energy watchdog the International Energy Agency. It describes the strength of the Atlantic market in such a way that it can afford to reject any or all the cargo that has built up at the Libyan ports since they were blocked. As a result, the outstanding cargo at both Ras Lanuf and Es Sider will need ship owners to clear them out and only once they have been taken off the oil fields will Libya be able to return to the high speed at which they were once producing.
Shippers could be willing to take the outstanding cargo at the Libyan ports, however, not for the same amount of money that is being offered. The security risk is still strong enough to deter them and with the Atlantic market being very prosperous, the Mediterranean could be left behind.
The opportunity is there for other companies to capitalise on the uncertain situation with the Libyan ports. For UK shipping companies, this is an opportunity to improve its revenue and provide an increase of work for its staff as well as offering higher wages due to the potential of larger contracts and risk involved. If the Mediterranean market is anticipated to take a hit from this problem, companies in the UK could get a boost from business coming through to the local ports.
Offering an increase in pay for the contracts could ensure that the two Libyan ports are able to attract the ship owners to add them to routes and load up on the outstanding cargo, but at this moment of time there may not be the money available to offer the increased money which may leave Ras Lanuf and Es Sider with something to reconsider. Who will make the first move? We’ll just have to wait and see…
This article was a guest blog for Changing Course courtesy of taxback.co.uk / @theonlytaxback