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Libya’s National Oil Corporation (NOC) said on Tuesday that it had reached an interim deal with Germany’s Wintershall to immediately resume production in concession areas and related fields, which would unblock 160,000 bpd worth of production that has been shut-in for most of the past two years over a dispute between the companies.
“This shutdown was enormously costly to Libya. I hope we can now get on with the business of meeting our oil production targets without interruptions,” NOC chairman Mustafa Sanalla said in the statement.
Last month, Sanalla said that a commercial dispute between Libya and Wintershall had shut in more than 160,000 bpd of output, costing the country nearly US$250 million monthly.
“We would be producing almost 1 million bpd if it were not for Wintershall’s refusal to implement terms it agreed to in 2010,” NOC’s chairman noted in a press release back then.
According to a Sanalla’s statement sent to The Wall Street Journal, the dispute between Wintershall and NOC is over liabilities that Wintershall owes to Libya dating back to 2008. According to a Wintershall spokesman, who spoke to The Journal, “there is no claim over money allegedly owed by Wintershall.”
Wintershall operates in eight onshore oil fields in the eastern Sirte Basin, and production has been stopped several times since 2013. When production had resumed, it was in limited quantities, according to the company’s website. In its 2016 production report, Wintershall said that in Libya, it was only able to produce again in onshore concession NC 96 from 16 September 2016, owing to the difficult political conditions, and it resumed production at a low level of 35,000 BOE per day.
Now under the interim agreement, Wintershall will get an amount of production “sufficient to cover its costs”, with all remaining output allocated to NOC, the Libyan company said on Tuesday. During the interim production arrangement deal, the two parties will try to work out their dispute over the legal framework of the operations, NOC said.
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In this week’s statement, NOC’s Sanalla said:
“Total oil production in Libya as of today is 830,000 b/d, and we are targeting one million barrels by end of July, 2017 as a result of the resumption of production from the Wintershall and linked Abouatiffel fields, as well as from 103 A and Nafoora.”
Libya reaching 1 million bpd of production by the end of next month would further complicate OPEC’s efforts to reduce collective output, given the fact that Libya is exempt from the production cut deal.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.