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2017-12-08 17:10:00

LIBYA - OPEC AGREEMENT

LIBYA - OPEC AGREEMENT

BLOOMBERG - OPEC appeared to score a diplomatic coup last week by persuading Libya, its most troubled member, to accept production limits. In reality, the agreement probably means little for the oil market.

The Organization of Petroleum Exporting Countries and its partners agreed on Nov. 30 to persevere with supply curbs until the end of next year, in a bid to drain oversupplied world markets. In a surprise addition, an output cap was imposed on members Libya and Nigeria, which had previously been spared any obligations while they struggled to recover barrels lost to armed conflict and sabotage.

The pact seemed to be a reversal for Libya, whose top oil official, Mustafa Sanalla, had outlined the country's aspirations to revive exports and its need for leniency while nation rebuilding took place.

Yet in practice, the production cap of about 1 million barrels a day imposes little constraint on Tripoli, which is barely able to push output any higher, consultants Eurasia Group and Wood Mackenzie say. Libya plans to abide by the target next year, according to a person familiar with the matter who asked not to be identified because the information isn't public.

"The OPEC quota doesn't matter," said Riccardo Fabiani, an analyst at Eurasia Group. "Moving beyond 1 million barrels a day in 2018 is going to be very difficult anyway."

With a fragile political accord barely holding the country together, Libya faces an array of challenges preventing its return to the output levels of about 1.6 million barrels a day pumped before the 2011 uprising against Muammar Qaddafi.

Potential Threats

Pipelines and other facilities are targeted by armed factions and tribal groups jostling for political control and a share of oil revenues.

"It would be an achievement in itself if Libya was able to maintain current rates of production," said Martijn Murphy, research manager for North African upstream at Wood Mackenzie. "There's still no central unity government, and so the potential for violence to flare is acute, and the threat of militias and tribes shutting down oil pipelines, valves or ports is ongoing."

One of the biggest constraints for Libya is financial as National Oil Corp. struggles to pay suppliers and engineers and do necessary maintenance, Fabiani said. NOC chairman Sanalla said in London in October that the company was receiving only 25 percent of its stipulated investment budget.

Russia, which set aside decades of rivalry with OPEC to join the production deal, had pressed the organization to impose caps on Libya and Nigeria. While the two countries were exempt from the accord hammered out last winter, the recovery in their output this year undermined the efforts of fellow producers to eliminate a global oil glut.

Output Pledge

Details on the terms were scarce even as OPEC's meeting concluded in Vienna, with no reference to the cap made in the cartel's closing statement or a notice issued afterward by Libya's NOC. There is a confidential document that commits Nigeria and Libya to limit their production to the highest level reached this year, without citing any figures, according to a person familiar with the matter who asked not to be identified because that pledge will be kept private.

Libya and Nigeria are to restrict their combined production to no more than 2.8 million barrels a day, Iranian Oil Minister Bijan Namdar Zanganeh said after last week's meeting in Vienna.

The two countries said they won't exceed their production peaks of 2017, Saudi Arabia's Energy Minister Khalid Al-Falih said after the same session. Their highest output levels recorded this year are 1.01 million barrels a day for Libya and 1.77 million barrels a day for Nigeria, according to data compiled by Bloomberg.

Despite the challenges it faces, Libya might be able to pump slightly more next year, Wood Mackenzie's Murphy said. Still, that would require rehabilitation of its main export terminals, Es Sider and Ras Lanuf, and the development of oil fields in the west and south of the country, he said.

Both Wood Mackenzie and Eurasia said they expect that, if Libya can increase production next year, it will do so, regardless of the agreement with OPEC. Other members of the organization, particularly Iraq and the United Arab Emirates, have flouted the output limits to which they submitted.

Libya "can cheat and exceed the quota and nobody will say anything," said Eurasia's Fabiani. "It's basically a nominal, or a paper, target that really doesn't mean much to OPEC."

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Earlier:

 LIBYA - OPEC DEAL
2017, December, 6, 12:20:00

LIBYA - OPEC DEAL

BLOOMBERG - Libya, which has been stepping up efforts to boost oil output, will maintain its current production level until the end of next year to stay in line with OPEC’s agreement to trim global supplies.

 

 LIBYAN OIL PRODUCTION 1 MBD
2017, October, 23, 11:15:00

LIBYAN OIL PRODUCTION 1 MBD

Libya’s oil production increased steeply to the current level of 850,000 b/d from a low point in August 2016 of below 300,000 b/d. Production surpassed 1 million b/d in July.

 

 OIL OUTPUT CONSENSUS
2017, July, 24, 13:55:00

OIL OUTPUT CONSENSUS

With prices still languishing below the $55-$60/b that some ministers have said they are targeting, some market watchers say OPEC and its non-OPEC partners have no choice but to deepen cuts to make up for output gains from exempt Nigeria and Libya, as well as sliding compliance from other members.

 

 LIBYA NEEDS $100 BLN
2017, January, 26, 18:45:00

LIBYA NEEDS $100 BLN

Libya froze all new foreign investment in 2011 after the civil war that toppled strongman Moammar Gadhafi. International oil companies such as Total SA of France and ConocoPhillips have long had operations in Libya, and Eni SpA of Italy has found ways to keep pumping even as clashes among warring militias and Islamic State damaged the country’s oil infrastructure.

 

 LIBYA CAN INCREASE
2016, November, 9, 18:50:00

LIBYA CAN INCREASE

Libya, a member of the Organization of Petroleum Exporting Countries, is struggling to boost crude production and exports since the NOC reached an agreement in September with Khalifa Haftar, the commander of forces controlling important oil ports. As a result of the deal, the country was able to ship 781,000 barrels from the port of Ras Lanuf on Sept. 21, the first international cargo from that terminal since force majeure was declared in December 2014.

 

 LIBYA RISES PRODUCTION
2016, September, 21, 18:50:00

LIBYA RISES PRODUCTION

Lybian crude output rose to 450,000 barrels a day after work resumed at some oil fields, Ibrahim Al-Awami, head of oil measurement department at state-run National Oil Corp., said by phone on Tuesday. Armed conflicts and political disputes have hurt the country’s production, which was 260,000 barrels a day in August.

 

 LIBYA HAS STARTED
2016, August, 9, 18:50:00

LIBYA HAS STARTED

Libya is seeking to boost crude production after rival leaders agreed last month to unify the state National Oil Corp. under a single management. The bulk of the country’s oil infrastructure is either damaged or straddles disputed territory as armed factions fought for control of producing fields.

 

 

Tags: LIBYA, OPEC, OIL, PRICE

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