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Two major fields reopen in Libya as disputes are settled

State firm NOC says it can recover output quickly and add to capacity, but some believe the country’s political disintegration makes this unlikely

Libya’s oil output could double by the end of the year as two major fields shut in by local disputes are brought back on stream, senior officials from the country’s energy ministry said on 19 October.

Total output capacity could “easily” exceed 1.2m barrels/day (b/d) thereafter, provided the country’s political strife is resolved, they added.

In mid-October, Libya was producing 440,000 b/d, a small increase on recent months, following the resumption of exports from the Zueitina export terminal, in the country’s east. Before the war in 2011, output capacity was 1.6m b/d.

Mustafa Sanallah, chairman of state-run National Oil Corporation (NOC), said on the sidelines of an IRN conference in London that talks with groups that had shut down pipelines from two large fields in the country’s southwest had progressed: “It has been a long marathon but we are near the end.” Capacity at Sharara, operated by a Repsol-NOC joint venture, is 300,000 b/d, and El Feel’s, operated by an Eni-NOC joint venture, is 130,000 b/d. Sanallah said both fields could produce “very soon” after disputes are settled.

Libya’s oil sector has endured a turbulent 10 months, with little sign of improvement.

In December 2014, militiamen linked to Libyan Dawn, the Misrata-backed militia group that has supported the Tripoli-based General National Congress (GNC), one of two governments vying for control of Libya, attacked the 340,000 b/d Es-Sider export terminal.

The attack damaged storage infrastructure and the port has been closed ever since.

Libya's oil sector has endured a turbulent 10 months, with little sign of improvement

The nearby 220,000 b/d Ras Lanuf terminal, also in Libya’s once-prolific central oil crescent, was shut too. NOC declared force majeure at a host of nearby fields after Islamic State (IS) struck at installations in March, destroying surface facilities at the 40,000 b/d Total-operated Mabruk field.

Sanallah said he hoped NOC would soon be able to reopen the two ports, and production from the Waha complex of fields to their south could begin as soon as Es-Sider was available. But Mabruk remains too dangerous. IS has consolidated its presence in Sirte, putting it within striking distance of energy assets in the oil crescent. NOC has relied only on reports of Mabruk’s damage. IS also made a failed attack on Ras Lanuf on 1 October.

Production in the east remains relatively secure, but hampered by the absence of remedial and maintenance work. Some workarounds have been necessary.

Ras Lanuf’s closure has forced producers from NOC’s Harouge unit, a joint venture with Canada’s Suncor, to divert crude to Zueitina, where capacity is 70,000 b/d. Germany’s Wintershall has done the same from its as-Sarah field. Zueitina shipped its first cargo since reopening on 8 October. Exports through the port are now around 30,000 b/d.

Further east the problems are different. Mohamed Ben Shitwan, head of Arabian Gulf Oil Company, NOC’s eastern unit, said in London that its workhorse Sarir field, which exports crude through Hariga port next to Tobruk, was producing 130,000 b/d.

Adding pumps and a new turbine to surface installations could lift this by 60,000 b/d by end-2016. Aside from the Sarir and nearby Misla (120,000 b/d), fields south of Zueitina, and some smaller onshore assets, the rest of Libya’s output is offshore, where the Bouri and El Jurf fields are producing about 70,000 b/d.

Despite the difficulties, Libya’s oil chiefs are still plotting longer-term expansion. New investment, exploration and enhanced oil recovery could help lift output to 2m b/d by 2017, said Bashir Garea, NOC’s exploration manager. Reserves would also grow substantially.

But political instability stands in the way of these plans, and the prospects of swift resolution to the country’s political crisis, or an end to its violence and insecurity, have dimmed again in recent weeks.

On 8 October, Bernardino Leon, the UN diplomat charged with getting Libya’s two warring governments to agree a government of national accord (GNA), announced his “final” proposal.

He appointed several leaders, including a prime minister, and made a raft of concessions to the GNC in an effort to secure its endorsement. The international community, including the GNC’s sponsors Qatar and Turkey, backed the deal.

But the gamble failed. Despite the concessions, the GNC immediately rejected the deal. The HoR, internationally recognised as Libya’s government, on 19 October also voted it down. The UN’s dialogue process now looks moribund. Leon himself is thought likely soon to be replaced.

Worse still, Leon’s proposal has exposed Libya’s divisions and revealed new ones. Several leaders from Misrata, the city whose powerful militias have largely backed the GNC, endorsed the GNA but were told by the GNC’s (Misratan) prime minister Khalifa al-Ghwell to keep out of politics. Leon’s proposed appointment of several Misratans to senior positions in the GNA triggered protests in other cities against the imposition of a “Misratan government” on Libya.

The country’s GNC-supporting Grand Mufti rejected the deal. General Khalifa Hafter, head of the Libyan National Army, which is allied to the HoR and is fighting against militant jihadi groups in Benghazi, has rejected the GNA too. His inclusion in any future national army is unacceptable to the GNC and Libya Dawn, against which Hafter’s army has also been fighting.

The chaos is likely to deepen now. The HoR’s parliamentary term – and the source of its claim to represent the country – was due to expire on 20 October, but it unilaterally extended its mandate.

As the HoR’s authority is challenged, Hafter’s ambitions to install a Sisi-like authoritarian regime on the country and crush the GNC and its Islamists are, fear some observers, now likely to re-emerge.

Amid this disintegration, IS continues to bed down in Sirte and has said it will target the country’s energy assets. Amid this chaotic backdrop, Libya’s oil ambitions, short and long term, look increasingly unlikely to be realised. “We have to remove the challenges first”, NOC’s Garea said of his country’s political chaos. “Then we will encourage investors to come back. But unless those challenges are removed it will take a long time.” 

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