Libya Oil Perspective
Iman Nikzad
Libya has long been known as the most important producer of crude oil in Africa. Sitting atop 48 billion barrels of proven oil reserves, the North African nation comes 9th among oil-rich countries in the world.
Like many other petrostates, Libya depends on petrodollars to run its economy. Oil revenues account for more than 90% of Libya's total revenue. According to the latest report released by Libya's Central Bank, the country saw its oil revenue jump from $5 billion in 2016 to more than $14 billion in 2017 – still far from more than the $50 billion the country earned before plunging into civil war.
Despite the more than double increase year-on-year in Libya's oil revenues, the country is still struggling with liquidity shortage and unprecedented depreciation of its national currency, largely affecting Libya's petroleum industry and development plans.
The governor of Libya's Central Bank recently said that the unrest in the country had shaved $160 billion off its oil revenue over recent years.
Libya joined the Organization of the Petroleum Exporting Countries (OPEC) in 1962. It was producing about 3 mb/d of crude oil in the 1970s. However, its oil output went on a downward trend in the following years to drop to 1.65 mb/d of light and sweet crude oil, supplied by six oil fields, by 2011 before the outbreak of civil war.
As the country plunged into civil war, its oil production fell to below 400,000 b/d. Libya was planning to bring its oil production to 1.7 mb/d in 2013 and 2.2 mb/d in 2023.
$18bn Investment
According to sources with precise knowledge of the matter, Libya would need $18 billion in investment to reach its production targets. After tensions subsided in 2017, Libya lifted its oil production to four-year highs. Last year, Libya was producing 820,000 b/d of oil, the highest average level in three years.
The Libyan Central Bank reported that the increase in the country's oil production in 2017 helped halve national budget deficit to $7.7 billion. The Sharara oil field, which holds 80% of Libya's oil reserves, produces the bulk of Libya's oil.
Libya's National Oil Corporation (NOC) is running Sharara in partnership with Spain's Repsol, France's Total, Austria's OMV and Norway's Statoil. Other energy majors operating under joint ventures with NOC in oil production are Italy's Eni and American companies ConocoPhillips and Hess.
Oil Destination
According to official data, non-distant European countries constitute 85% of Libya's oil export destinations. Before the outbreak of civil war there, Libya was delivering 403 million barrels a year of crude oil to Europe, supplying 11% of Europe's crude oil needs. Libya was known to be the third largest supplier of crude oil to Europe after Norway and Russia.
Libya Oil Fields, Pipelines and Refineries
Libya has five oil refineries capable of processing 380,000 b/d of crude oil.
Except for Libya's largest oil refinery Ras Lanuf, all other treatment facilities are operational. Ras Lanuf, which stopped processing five years ago, is expected to come online anew in the second half of this year. Libya exported 34,300 b/d of petroleum products in 2016.
NOC plans to increase Zawiya's refining capacity by 30,000 b/d to 150,000 b/d. The national company also intends to raise the Ras Lanuf capacity to 380,000 b/d and the Tobruk capacity to 30,000 b/d.
NOC is also planning to build a 30,000-barrel-a-day refinery in southern Libya although no timeframe is given for the project due to ongoing unrest in the country.
Output Hike
Given what was said above and on the basis of crude oil production-consumption balance in Libya, it may be argued that this country would have no option but to redouble its efforts for increasing its crude oil production.
Libya, along with Nigeria, has been excluded from OPEC-required production cut, due to the two nations' unstable conditions, they can raise their output to any level without facing any restrictions. This issue is also viewed as a challenge to the production cut agreed upon by OPEC - non-OPEC oil producers which signed the "Declaration of Cooperation".
Libyan oil officials have announced plans to reach 1.5 mb/d oil production by end-2018. It may look unlikely for Libya to reach 1.5 mb/d production in the short term on technical grounds (production decline is even likely due to low security levels); however, if domestic tensions are contained Libya has potential to increase its production.
Oil analysts believe that in case Libya manages to lift its output while other key elements of oil market remain unchanged, the oil prices would be forced to go on a downward trend. That is why Libya's oil production in the current year would be a key factor in the OPEC and global oil supply.
Anyway, in case Libya increases its oil production at a sustainable level, it will either join the proponents of the strategy of OPEC limited supply and decrease its crude oil production gradually or opt to maintain its output level due to unplanned production decline by some OPEC member states and the special conditions of some producers like Venezuela and Nigeria in order to remain exempted from the OPEC production cut quota.
It is still too early to conclude that Libya is making efforts to supply more crude oil in the market.