Libya’s crude oil production could reach 800,000 bpd over the next two weeks and top 1 million barrels daily within a month now that the National Oil Corporation has lifted the force majeure from another two oil export terminals.
“As NOC highly commends the efforts exerted by all local and international parties, it undertakes to hold to the non-political professional principles, continues in performing its responsibilities and duties in a completely neutral manner and declares that as production resumes from Waha and Harouge fields, production level will reach 800 thousand bbl./day during two weeks and will exceed one million barrels in four weeks,” NOC said in a statement.
NOC first announced it would lift the force majeure imposed earlier this year from two oil ports after the Libyan National Army of General Halifa Khaftar agreed to lift a blockade of the oil-exporting infrastructure that started in January this year.
Within a month, the country’s oil production had recovered from below 100,000 bpd to over 500,000 bpd, not least thanks to the restart of production at the Sharara field, Libya’s largest, with a capacity of 300,000 bpd.
A month ago, expectations were that the return of a full 1 million bpd supply from Libya was not imminent and would likely take months. However, the National Oil Corporation appears bent on ramping up production as quickly as possible, which is understandable with the less than stellar track record of various militarized factions in upholding ceasefires.
This would mean more pressure for oil prices: the North African OPEC member was exempted from the OPEC+ cuts, and this means it could expand production however much it wants to and add supply to an extra-sensitive market.
On the plus side, from OPEC’s point of view, NOC also warned a production level of 1 million bpd would be unsustainable unless Libya’s government provides the company with enough funds to pay off debts accumulated during the oil port blockade. NOC also said it would be unable to push production back to pre-blockade levels of 1.2 million bpd.
By Irina Slav for Oilprice.com
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This so because some of Libya’s major oilfields and pumping stations need intensive maintenance having been idle for a long time and partly damaged by the fighting.
Furthermore, Libya has been exempted from OPEC+ production cuts provided its production doesn’t exceed 1 mbd. The exemption will be withdrawn if production rises above 1 mbd.
Still, OPEC+ has indicated that it will extend the current cuts of 7.77 mbd into next year. The original scenario was for OPEC+ to reduce the cuts to 5.77 mbd from January 2021. Keeping the current cuts intact will more than offset even an addition of 1 mbd of Libyan production.
Therefore, OPEC+ shouldn’t worry much.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London