Qaddafi Tanks Deprived of Diesel as Ships Shunning Libya: Freight Markets
Libyan leader Muammar Qaddafi is facing a fourth month without the diesel cargoes needed to power tanks as he endures an 11-week air campaign led by NATO.
No vessel delivered the fuel to Qaddafi-controlled ports since February, according to five oil-product traders and three shipbrokers interviewed by Bloomberg. The country, once Africa’s third-largest crude producer, normally got four shipments a month, they said. One vessel holds 34 million liters (9 million gallons), enough to fill all Libyan tanks 18 times over, based on data from IHS Jane’s, a military analysis company.
While the country has the continent’s biggest proven crude reserves, oil fields and refineries were shut by the fighting that began with the uprising against the regime in February. Crude rose 37 percent in New York in the next three months on concern that violence would spread to bigger producers. Prices fell 19 percent since the start of May as fighting failed to spread, Saudi Arabia offered more cargoes and on signs global economic growth is weakening.
“I suspect Qaddafi has gone to an austere environment and is not able to replace fuel,” said Robert Maginnis, a senior strategist for the U.S. Army in the Pentagon. “Qaddafi would be hurt more than the rebels if diesel supplies are cut.”
The Mediterranean Sea is the world’s biggest market for aframax tankers, which carry about 690,000 barrels of oil, according to Poten & Partners, a New York-based consultant. Rates on the cross-Mediterranean route fell 43 percent since March 2, based on data from the Baltic Exchange, which publishes assessments for more than 50 maritime routes.
The rebels, who are using pick-up trucks mounted with machine guns or rocket launchers, received four cargoes of gasoline last month, a separate survey showed.
Libya’s leader has tried to keep his rocket launchers stationary in urban areas, making them harder targets for NATO planes, and limited the movement of military vehicles to conserve diesel, Maginnis said.
NATO’s use of Apache helicopters this month is forcing Qaddafi to move vehicles, draining fuel stockpiles, said David Hartwell, a London-based analyst at IHS Jane’s. British Apaches used Hellfire missiles to destroy a rocket-launch system near the eastern town of Brega, the Ministry of Defence said June 5.
Qaddafi, who has ruled for four decades, hasn’t been getting gasoline shipments either, according to four traders and two shipbrokers interviewed earlier this month. Libya typically imported eight cargoes a month, each enough to fill about 650,000 cars, they said.
People in Tripoli, the capital, are waiting as long as three days at gas stations, said Alan Fraser, a London-based security analyst at AKE Group Ltd., who got his information from contacts in the city.
Qaddafi had 1,930 Russian-built tanks before the uprising began, according to Hartwell at IHS Jane’s. Each needs about 1,000 liters (264 gallons) of diesel, using 2.1 liters to 3.3 liters per kilometer (0.62 miles) traveled, Hartwell said.
The country’s refineries produced 5.2 million metric tons of diesel and gasoline in 2008, according to the International Energy Agency, a Paris-based adviser to industrialized nations. The plants will probably process no more than 90,000 barrels of oil a day this summer, compared with 370,000 barrels normally, the IEA said in a report in May.
Ras Lanuf is the largest of Libya’s five refineries, handling 220,000 barrels a day, according to Samuel Ciszuk, a London-based senior Middle East and North Africa analyst at IHS Energy, a research company. The plant and oil fields supplying it are closed, he said today. Qaddafi still has the operational Zawiyah refinery, with a capacity of less than 100,000 barrels.
The Marsa El Brega and Sarir refineries, each capable of handling 10,000 barrels, are also shut, as is the rebel-held 20,000-barrel refinery in Tobruk, Ciszuk said.
Libyan crude production fell to 200,000 barrels a day last month, compared with an average of 1.55 million in 2010, according to data compiled by Bloomberg. The country won’t be able to restore full output until 2014, according to the IEA.
For the shipping market, the fighting in Libya means fewer cargoes. Charter rates for aframaxes on the cross-Mediterranean route surged 96 percent in February as refineries accelerated purchases to lock in supplies as the conflict erupted. They’ve slumped 43 percent to 109.58 Worldscale points since peaking on March 2, according to data from the Baltic Exchange in London.
Worldscale points are a percentage of a flat rate for more than 320,000 routes. They are revised annually by the Worldscale Association in London to reflect fuel costs, port tariffs and exchange rates. Each one gives ship owners and oil companies a starting point for negotiating transport rates without having to calculate the value of each deal from scratch.
The drop in cargoes is compounding a glut of ships ordered in 2007 and 2008 when rates rose as high as 391 Worldscale points. Vessels on order are equal to 12 percent of the existing fleet, according to Redhill, England-based IHS Fairplay, which compiles data on ships.
About 90 percent of global trade moves by sea, the Round Table of International Shipping Associations estimates.
The North Atlantic Treaty Organization has 20 ships under its command patrolling the central Mediterranean to enforce an arms embargo. Its jets flew 11,644 sorties since March 31, the Brussels-based group of 28 nations said in a statement June 19.
The United Nations froze Qaddafi’s assets and those of companies linked to the regime, including Libyan National Oil Corp. in February. The measures make it harder for Qaddafi to buy fuel from neighboring countries, said Charles Gurdon, a London-based managing director at Menas Associates, a political- risk consultant.
The Libyan regime faces dwindling finances and shrinking fuel supplies, according to Farhat Bengdara, who ran the central bank before defecting.
“They tried to import fuel by any means, but they couldn’t,” Bengdara said in an interview in Dubai on June 13. “The end is very close.”
To contact the reporter on this story: Rob Sheridan in London at email@example.com.