Libya’s crude output could soar as its state oil company moved toward resolving a dispute. But putting at risk political reconciliation between the nation’s rival factions and a tentative rebound in its oil production is the regional crisis over Qatar has spilled over into Libya.
In a step forward in a dispute that was shutting in up to 160,000 barrels per day (bpd) of output, an interim arrangement to resume production in Libya was agreed upon between Libya’s National Oil Corporation (NOC) and German oil and gas company Wintershall.
In Wintershall’s concession areas in eastern Libya, the deal would allow production to begin immediately, NOC said.
Following restarts at Wintershall’s fields and other fields where output has been blocked because of pipeline connections, it was targeting an increase in national production to 1 million barrels per day (bpd) by the end of July from 830,000 bpd currently, it said.
The agreement “provides that during this interim arrangement, the parties will attempt to resolve their dispute regarding the legal framework governing the petroleum operations,” the NOC said in a statement.
Led by Nigeria and Libya, two members exempt from the supply reduction deal, OPEC said its own output rose by 336,000 bpd in May to 32.14 million bpd, and the announcement came amidst such a business environment. Under way at a “slower pace” was a long-awaited rebalancing of the global oil market, OPEC on Tuesday said.
Not to make use a rift between several Arab states and Qatar “as a pretext for exporting oil illegally”, NOC warned authorities based in the east of the country.
Blocking operations by Glencore, which has a contract with the NOC to lift oil from the eastern port of Marsa al-Hariga and in which Qatar Holding owns a stake, was threatened by authorities in eastern Libya.
For the first time since 2014, Libyan oil output recently rose above 800,000 barrels per day (bpd) and any such move would put at risk that partial recovery in Libyan oil output.
Between competing governments and armed factions based in Tripoli and the east, Libya has been split for three years.
Through a parallel institution in Benghazi, factions based in the east have repeatedly tried to sell oil independently. A U.N. Security Council resolutions that recognise the NOC in Tripoli as the sole legitimate oil exporter helped in preventing them from doing so.
Ports and other oil facilities have also been blocked by some groups.
Major ports have been kept open in recent months for the Tripoli NOC by Khalifa Haftar’s Libyan National Army (LNA) despite past threats from eastern officials to disrupt production.
But east Libyan factions have stepped up their rhetoric against opponents in the west after Arab states including Egypt and the United Arab Emirates cut ties with Qatar last week. While accusing Qatar of supporting Islamist-leaning rivals based in west Libya, the eastern camp has long been backed by Egypt and the UAE.
He had warned the head of the eastern government, Abdullah al-Thinni, against any new port blockades, NOC Chairman Mustafa Sanalla said.
“We respect the Libyan National Army General Command for its responsible opposition to port blockades,” Sanalla wrote, according to the NOC statement. “I hope you will take notice of their wise position on this matter.”
(Adapted from CNBC)