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Libya outlines ambitious plans to restore oil output

By Reuters - Apr 28,2016 - Last updated at Apr 28,2016

A general view of the El Sharara oilfield Libya (Reuters file photo)

LONDON/TRIPOLI — Libya's National Oil Corporation (NOC) has ambitious plans to restore output to pre-2011 levels after years of violence and disruption, officials said.

Oil output is now less than a quarter of the 1.6 million barrels per day (bpd) Libya pumped before Muammar Qadhafi fell in 2011, and the NOC in Tripoli hopes to ramp it up swiftly with the backing of a new unity government.

Full recovery could take years because of shutdowns by disgruntled workers, political rivalry and attacks by militants.

Militants hit Al Ghani, Mabrouk, and Dahra fields in the Sirte basin over a year ago, forcing the NOC to declare force-majeure on 11 fields, and there have been further attacks since then.

An NOC official in Tripoli told Reuters that at least 200,000 bpd of capacity had been damaged in attacks on oil fields in the western Sirte basin, Libya's most prolific.

It may take the NOC until late 2017 or 2018 to bring those fields back to full capacity, the official said, if it can afford the repairs.

The first phase of a three-stage recovery plan can be implemented within three months, a second NOC official in Tripoli said, allowing fields like El Sharara and Elephant, with a combined capacity of around 430,000 bpd, to come back on stream.

But other fields, including those that have been directly attacked and others that feed via pipeline to Libya's largest export terminals at Ras Lanuf and Es Sider, may take longer to bring back online, he added.

Phase two covers six to eight months down the line while the final phase covers fields that will take between eight months and several years to reopen.

Infrastructure damage at the ports could take years to repair and will delay the restart of the fields feeding to them. Another big factor is the cost of the repairs.

"All those plans depend on security. If proper and robust security at the oil facilities is not in place, then our plans will be in jeopardy," the second official said.

Earlier this year, militants attacked Ras Lanuf and Es Sider, which can handle 600,000 bpd of crude exports. The two terminals had been closed since December 2014, after an attack on Es Sider.

The latest assault left just 12 out of 32 storage tanks at the terminals operational, NOC Chairman Mustafa Sanalla told Reuters in February. It may take NOC "many years" to rebuild damaged "long lead items" at the ports, he said.

Modest, conditional ramp-up

A UN-backed unity government's move to Tripoli last month raised hopes that Libya could restart idled fields and reopen export terminals, and the NOC in Tripoli says it could quickly double production to over 700,000 bpd, if political and security conditions stabilise.

The government is still struggling to gain clear support, especially in the east. A parallel NOC in the east exported a shipment of oil independently for the first time this week, further complicating the prospects for recovery.

"We are focused now on how to resume oil production. In some places, we'll just have to open the valves," Sanalla said last week. "But first of all, we need to have stability."

Industry sources do not expect production to increase beyond 600,000 bpd within the next few months.

"If the new unity government is successful in asserting some control, then output should recover, but only slowly and with setbacks," Energy Aspects analyst Richard Mallinson told the Reuters Global Oil Forum earlier this month.

Security challenge

The NOC hopes the unity government can create a unified security force to protect oil infrastructure.

For now, security will depend on an array of armed factions including the Petroleum Facilities Guard (PFG), a semi-official corps that has blockaded ports and whose attempt in 2014 to export crude independently was thwarted by US special forces.

PFG leader Ibrahim Jathran says he supports the unity government and is ready to reopen the ports of Zueitina, Es Sider, and Ras Lanuf, and Sanalla has said the NOC would accept the PFG as part of a future, national security force.

But the blockade and the PFG's refusal to allow storage tanks to be emptied at threatened terminals have infuriated the NOC. Meanwhile a rival PFG faction, Battalion 152, has said it is loyal to eastern military commander Khalifa Haftar, whose political allies have blocked the eastern parliament from approving the unity government.

The unity government said on Sunday it feared further attacks on coastal infrastructure and oil fields, and that it had received reports that these were threatened not only by Daesh but also by Qadhafi loyalists and Sudanese rebels.

Financing could be a challenge in the short term as Libya has been hard hit by falling oil prices and has had to bear the double burden of a price crash and constrained output simultaneously. 


Sanalla has estimated the cost of lost production at more than $68 billion for the past three years, and says Libya loses $30 million every day because of shutdowns. Security worries in some areas mean the NOC has yet to assess the full cost to repair damaged facilities.

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