Libya set to export oil again after NOC lifts legal clause

The months-long ban deprived OPEC member and once major oil producer of about one million barrels a day of shipments.

Libya troops
Troops loyal to Libya's internationally-recognised government on their way to Sirte, in Tripoli, Libya, where oil facilities have been at the heart of the political conflict with different groups repeatedly closing them as part of political demands [File: Ayman Sahely/Reuters]

Libya’s National Oil Corp. lifted a legal clause that will allow crude exports from all of the country’s ports, ending months of blockade that deprived the OPEC nation of at least 1 million barrels a day of shipments.

The Kriti Bastion tanker has started loading 730,000 barrels of crude at Es Sider, with the cargo heading to Italy, according to port operator Waha Oil Co. The facility is one of many terminals and fields that were shut down by supporters of Khalifa Haftar, an eastern commander fighting the UN-backed government, which has slashed production to just 90,000 barrels a day from 1.2 million a day before the blockade in January.

Libya graph

The NOC said it ended force majeure on oil exports on Friday. Output from the once-major producing nation, however, will be slow to recover because of technical issues at oil fields, pipelines and terminals, the state company said. That could give the OPEC+ alliance, in the midst of massive cuts, some breathing space as it seeks to keep additional supply out of the market.

“On the top of the $6.5 billion in lost production we as a nation have suffered, NOC faces huge extra costs to repair infrastructure damage,” NOC Chairman Mustafa Sanalla said. The cost of repairing infrastructure and oil wells “will run to billions of dinars,” he said.

The nation has produced little crude since January amid a civil war. Libya’s oil facilities have been at the heart of the political conflict, with different groups repeatedly closing facilities as part of financial and political demands. The often sudden shutdowns and lack of maintenance have affected production capacity.

The NOC said on Tuesday that without rapid maintenance and repairs, it may only be able to supply 650,000 barrels a day by 2022. That’s barely half the level Libya was pumping in January and only a fraction of the 1.6 millions a day it was producing before the civil war in 2011.

“Our infrastructure has suffered lasting damage, and our focus now must be on maintenance and securing a budget for the work to be done,” Sanalla said. “We also must take steps to ensure Libya’s oil production is never again held to ransom.”

Libya’s internationally recognized Government of National Accord, supported by Turkey, has recently pushed back Haftar’s forces, backed by the United Arab Emirates, Russia and Egypt, from taking over the capital Tripoli. The two sides are poised to square off near Sirte, where some of its largest fields and export terminals are located.

Any increase in supply from Libya, which is exempt from the OPEC+ output cuts deal, could make it harder for the group to revive the global oil market. Massive supply reductions by the Organization of Petroleum Exporting Countries and its allies have revived oil prices from the depths of the coronavirus crisis. Brent crude in London traded near $42 a barrel on Friday compared with a two-decade low below $16 in April.

Source: Bloomberg