Kwok W Wan, LONDON: Libyan oil production will hit 1 million barrels a day (b/d) in six months, and reach pre-war levels in less than 15, said Opec secretary general Abdalla El-Badri on Tuesday. His statement confirmed yesterday’s production update from Petroleum Economist.
He added that the country’s oil infrastructure was relatively unscathed, contrary to some media reports, and that the return of Libyan oil to the market would not dramatically affect prices because of the specific nature of the light sweet crude and the country’s long-standing customers.
“There is not much damage to the oil facilities and NOC (National Oil Corporation) and the government are moving fast to come up with 1 million [b/d] in six months and go back to normal production in 15 months or less,” El-Badri told the Oil and Money conference in London.
“Prices will not be affected dramatically [by the return of Libyan oil]. This is a very special crude, and it has very special customers who have been buying it for many years,” he added. Libya produced around 1.6 million b/d before civil war forced production to be shut in.
Ghanem pessimistic
But former Libyan oil minister Shokri Ghanem was more pessimistic regarding the return of crude production, with full output not expected for another 18 months because of looting and missing parts at oil installations.
“Sidra, which can export one third our production, is very much damaged. And also Brega … and Ras Lanuf have problems. Zueitina has a little bit less. Zawiyah has a problem, but less than Ras Lanuf and Brega,” Ghanem said at the same conference.
He called the first 500,000-600,000 b/d oil the “easy” production and expected this level to be reached by year-end, but ramping up from there would be a lot harder, with the cost of getting the industry up and running into billions of dollars – “$3 billion to $4 billion at least. Like I said, we need 2,000 vehicles… import lots of spare parts, rebuild terminals and metering stations, so there’s going to be a lot [of work to be done],” Ghanem said.
He added that foreign companies that had been active in Libya were yet to return or contribute to the cost of rebuilding because oil contracts were yet to be finalised. On a personal note, Ghanem said he planned to rest for the time being.
El-Badri responds
Responding to Ghanem’s more pessimistic forecast of Libyan oil output, El-Badri said his reports from the country produced a different story, and reiterated there was not much damage to some of the large fields. “There is nothing wrong with the Elephant oilfield," El-Badri said, contradicting a report from Reuters news agency that said the field "lay in ruins".
Refering to the Reuters story, El-Badri added: "Somebody went there, and he wasn’t really experienced to know the field itself. The field works, and Sharara will run. As Dr Shokri said, some of the cars and accomodation [was damaged], but it has nothing to do with the fields themselves.”
El-Badri also made it clear that he would not take up a role in Libya’s oil industry, if offered – El-Badri is a former Chairman of NOC and Libyan oil minister.
Regarding oil prices, Opec assumed a medium term price of $85-95 a barrel and $133/b up to 2035, El-Badri said. But he added, the cost of oil production is increasing. “If you look at the price now, if you look at the cost of materials, the cost of developing a new project has grown by 130%.”
Capacity increase
Opec countries will invest around $300 billion in 132 oil projects up to 2015, which would increase production capacity by 21 million b/d, although he added that not all projects would stick to that timetable, because of unexpected events such as wars or a sharp downturn in Chinese demand, the timeframe could slip “maybe it will be 2016, 2017”.