Civil war-torn Libya has resumed oil production at its biggest oilfield, hoping to put an end to the bitter infighting that has crippled its oil output since the beginning of the year, but it is now giving OPEC and its allies another concern about rising supply just as OPEC+ extended its deep 9.7-million-bpd cuts by one month to the end of July.
Libya’s oil industry has been in total disarray after a group of paramilitary formations affiliated with the Libyan National Army (LNA) of eastern Libyan strongman General Khalifa Haftar occupied Libya’s oil export terminals in January along with pipelines and fields. The blockade came amid continued fighting between the LNA, which is loyal to the eastern Libyan government, and the forces loyal to the Government of National Accord (GNA), which is recognized by the United Nations.
As a result of the blockade, Libya’s oil production –which had stood at more than 1 million bpd at the start of January – collapsed to less than 100,000 bpd.
Last week, the GNA said it had taken full control of Tripoli from Haftar’s LNA.
Libya’s National Oil Corporation (NOC) said on Sunday that production at the 300,000-bpd Sharara oilfield had resumed after negotiating the opening of an oilfield valve that had been closed since January.
The first production phase at Sharara will begin at a capacity of 30,000 bpd, Libya’s state oil firm said in a statement, noting that production is expected to return to full capacity within 90 days due to the damages caused by the long shutdown.
Libya also restarted a second oilfield over the weekend, the 70,000-bpd El Feel which is linked to Sharara, a field engineer told Reuters on Sunday.
The U.S. Embassy in Libya welcomed the re-opening of the Sharara oilfield, saying that “Now is the time for all responsible parties to reject attempts to militarize the energy sector & subjugate critical infrastructure to foreign interests.”
While the resumption of much-needed oil production is crucial for Libya’s oil revenues and economy, the restart of Libyan oilfields could give OPEC+ another headache over the next few months, on top of the uncertainty about demand recovery. If Libya, which is exempt from the OPEC+ cuts, returns to pumping 1 million bpd in the coming months, “it would prove to be a bit of headache to OPEC+,” ING strategists Warren Patterson and Wenyu Yao said on Monday.
By Tsvetana Paraskova for Oilprice.com