Libya’s state oil company said it has struck a deal to restart exports from ports captured just days ago by a regional faction in the east of the country, potentially adding supply at a delicate juncture for crude prices.
Mustafa Sanalla, chairman of the country’s National Oil Corporation, said forces loyal to the eastern commander Khalifa Haftar had handed over the ports, which could make way for the resumption of export of crude oil from the Zueitina and Ras Lanuf terminals.
In recent days forces led by Mr Haftar, close to the eastern government, defeated the Petroleum Facilities Guard, led by Ibrahim Jathran and allied to the UN-backed Tripoli government, and seized control of the key oil export facilities.
This had sparked fears of a widening of the conflict in Libya, with east and west openly fighting over the resources of the fragmented Opec-member country. But the agreement between Haftar and the NOC signals an apparent willingness to co-operate with the government in Tripoli, potentially allowing oil exports to stabilise or pick up
“Exports will resume immediately from Zueitina and Ras Lanuf, and will continue at Brega,” said Mr Sanalla in a statement, adding the decision to end a force majeure on exports was backed by both eastern and western factions in Libya.
“Exports will resume from Es Sider as soon as possible.”
Political infighting over control of Libya’s oil industry, and more recently Isis militants in the north African country, have caused blockades and damaged oil infrastructure that has hindered production and exports that provide the bulk of the country’s revenues.
Libya’s oil production has fallen from a prewar level of around 1.6m barrels a day to well below 300,000 b/d in recent months, limiting the country’s exports.
Higher foreign oil sales could provide much-needed funds for a country devastated by five years of factional fighting after the 2011 rebellion against Colonel Muammer Gaddafi. It could also add more barrels to a global oil market struggling to clear a persistent supply glut.
“The situation remains extremely fluid and there is still a high probability that production and exports do not rise at all, given Libya’s political complexity,” warned analysts at Energy Aspects, a London-based consultancy, this week.
They argued that Mr Haftar is still seeking greater power in the country and showing he could capture the terminals was a means of increasing his leverage, leaving them at risk if he is unsuccessful in extracting concessions from Tripoli.
Other analysts said the reopening of these ports had the potential to more than double Libyan crude production, but significant work may be required on fields, pipelines, and ports.
Any additional crude from the country may weigh on oil prices, just as the world’s biggest producer countries prepare to meet in Algeria this month for talks about potentially capping output, as a two-year glut shows little sign of easing any time soon.
Brent, the international benchmark, as fallen about 10 per cent over the past month to trade below $46 a barrel. It is now exactly two years since Brent last traded above $100 a barrel, the level it averaged between 2011 and 2014.
Mr Sanalla said this week he expected Libya’s oil production to double to 600,000 b/d within a month and that it could reach 950,000 b/d by the end of the year. He admitted this was dependent on the national oil company receiving essential funds from the budget for repairs and on ports and closed pipelines in the south-west of the country being open.
Expectations that Nigerian oil supplies could also be returning has put pressure on prices in recent days, amid reports of flows of the Qua Iboe grade reportedly ready to resume even as force majeure on it remains in place.
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