What’s behind Libya’s production boost?
Libya’s oil production has increased steeply from August 2016’s low point of below 300,000 barrels per day (b/d) to around 850,000 b/d at present, passing the 1 million b/d barrier in July. But Wood Mackenzie believes Libya may now be reaching its near-term production limits and future growth will be gradual.
Effective export capacity will be constrained by damage to the key ports of As Sidrah and Ras Lanuf limiting production to a maximum of 1.25 million b/d, National Oil Corporation’s (NOC) previously announced 2017 year-end target. Reaching this would be quite an achievement, given ongoing challenges, including international oil companies’ reluctance to recommit capital and expertise, a national oil company starved of funding and, not least, the propensity for violence to flare up and armed groups to hinder oil output.
With political agreement still some way off, international oil companies have taken differing stances to the country’s upstream sector. North American players continue to view Libya with trepidation and some may seek to mitigate their exposure by divesting. But for many European companies, the risks are manageable and a gradual re-entry into familiar projects without committing capital makes sense.
OPEC has ruled that Libya will remain exempt from any production cap: a tacit acknowledgement of the upside limitations to the country’s production recovery. We expect that it will be well into next decade before production is restored to pre-war levels. Maintaining stable output of 1 million b/d and realising incremental gains in the interim could be considered a success and may help avert a deepening of the country’s crisis. The possibility of longer-term political normalisation and a reduction in conflict will depend on the country being able to maintain oil production.
Source: Wood Mackenzie