Two of Libya’s key ports have reopened despite the continuing unrest in the country, but the oil ministry says they both need maintenance work before they can resume shipping fuel to customers.
Tripoli reached an agreement on July 6 with rebels to allow operations to resume at the eastern ports of Es Sider, the nation’s largest terminal, and Ras Lanuf, the third largest. Oil Ministry Measurement Director Ibrahim Al Awami told Bloomberg News on July 16, “There is a preventative maintenance operation underway so that loadings can resume.”
Libya’s National Oil Corp. says the country has resumed oil production of about 550,000 barrels a day, up from the estimated 300,000 barrels of oil a day it produced in June. The oil ministry said the two ports now have about 7.5 million barrels of oil in storage waiting to be shipped. Together, Es Sider and Ras Lanuf now are storing an estimated 11 million barrels of oil.
If and when the maintenance at the two ports is satisfactorily completed, they have the capacity of exporting 500,000 barrels of oil a day, more than a third of Libya’s overall export capacity of 1.25 million barrels a day.
Although Libya has the largest proven oil reserves in Africa, unrest in the country has diminished its output in the past year to the lowest levels among OPEC countries. On July 15, the Tripoli government said it might seek support from foreign forces to restore order in the county because of three straight days of bloodshed between rival rebel militias.
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Meantime, it’s been four months since any oil was shipped out of Libya. And that cargo was under the control of rebels who tried to sell it without government permission. The vessel sailed, but was soon intercepted by the U.S. Navy and returned to Tripoli’s custody.
Another reason for the delay in shipping Libyan oil is that international customers are seeking discounts because of the country’s current instability. Libyan government officials and European oil executives told The Wall Street Journal that the resumption of oil production has caused world oil prices to drop, even though none of this has made it to foreign markets.
The state-run National Oil Co. (NOC) is negotiating with potential customers who had to buy oil elsewhere when Libyan oil stopped flowing earlier in 2014, according to sources who requested anonymity. One European executive told The Journal, “Buyers want a big discount after all these delays.”
So far, Libya has responded by cutting the price of its premium oil by between 5 cents and 10 cents a barrel, far less of a discount than the $1 cut offered by competitors. Another anonymous European oil executive called Libyan oil “uncompetitively priced.” As a result, both executives said their companies were avoiding Libyan oil for the time being.
By Andy Tully of Oilprice.com