- Libya’s output has skyrocketed in the latter half of the year to its highest level in more than five years, reaching 1.28 million barrels per day as reported in November, more than double its June production of 500,000 bpd.
- With oil now hovering near bear market territory, OPEC is in talks with Libya about a production cut deal — but its oil chief says the country should be exempt.
- The North African country of 6.4 million has been struggling to rebuild its energy industry since its 2011 revolution that ousted longtime leader Muammar Gaddafi and the ensuing collapse in central power.
"The OPEC community has understood the difficulties we face –- Libya has withheld more than any other country from the global market," Mustafa Sanalla, chairman of the country's National Oil Corporation (NOC), told Bloomberg on Monday. "This should be factored in."
The comments come on the back of months of increased production for Libya, which along with Nigeria has been exempt from OPEC cuts since January 2017 because of internal conflict.
Now, with oil prices toying with bear market territory — down from a nearly four-year high in October to a 10-day fall that by last Friday became the longest losing streak for crude in 34 years — OPEC is in talks with both Libya and Nigeria about a production cut deal.
Saudi Arabia, the 15-member cartel's top exporter, has said the group needs to shave production by about 1 million barrels per day (bpd). The worry over a supply glut comes after the kingdom initially moved to bolster inventories ahead of U.S. sanctions on Iran's energy sector, which turned out to be less harsh than markets expected.
Libya's output has skyrocketed in the latter half of the year to its highest level in more than five years, reaching 1.28 million barrels per day (bpd), the NOC chief reported on November 14. This is more than double its June production of 500,000 bpd, and Sanalla said in October the country is targeting an increase to 1.6 million bpd.
The North African country of 6.4 million has been struggling to rebuild its energy industry since its 2011 revolution that ousted longtime leader Moammar Gadhafi and the ensuing collapse in central power. Authority is now contested between rival governments in the country's east and west, each supported by different external powers and tribal factions.
Oil production facilities have been hit over the years by terrorist attacks and takeovers by warring militias. In September, the U.S. Treasury department in conjunction with the UN imposed sanctions on a leading Libyan militia leader for his hijacking of vital oil facilities the previous June.
And while Libya's population sits above the largest proven oil reserves in Africa, its population has felt practically no benefit from them — the UN estimates that more than 40 percent of Libyans live below the poverty line.
Recent political developments may provide some optimism for Libya. General Khalifa Haftar, the charismatic leader in control of the country's eastern government in Tobruk, and Prime Minister Fayyez Serraj of the rival Government of National Accord (GNA) in the western city of Tripoli, last week agreed to support a UN plan to hold elections in early 2019.
The GNA is Libya's internationally-recognized government while Haftar's government is supported by the United Arab Emirates and Egypt and a number of militia groups. Technically, the two bodies are supposed to be united under the GNA, but they do not fully recognize one another and thus make their own laws regardless of joint consensus.
"Long-term oil production will likely continue to rise as a political agreement would facilitate more investment in oil fields," the consultancy firm Eurasia Group said in a research note last week.
While previously opposed to elections, Haftar is believed to be more supportive of early elections to take advantage of his heightened popularity vis-a-vis Serraj. Elections are likely to be complicated, however, and the extent to which all stakeholders and factions in Libya accept the results is far from certain.
Under Haftar's control is the "oil crescent" in eastern Libya's Gulf of Sirte, which holds four major ports that comprise the lion's share of the country's oil exports. Exports from the four ports under Haftar's control are Libya's main source of much-needed hard currency.
A return to an electoral process will help in restoring legitimacy to the political system, as well as enable the reunification of institutions and security forces, said Sarah Alshaalan, a Middle East and North Africa researcher at Eurasia Group. This means oil production will likely increase alongside improved confidence in Libya's political prospects.
Still, as Alshaalan said, the country remains in a state of civil war and under threat from terrorism. "Although recent violent outbreaks have not impacted oil production, pressure on oil refineries from Islamists or militias along with the threat posed by kidnappings and war-related damage to assets will present risks to any business willing to operate in the country."