Reuters: Libyan Oil Output - How Quickly Can It Rise?
10.07.2011 - NEWS

October 7, 2011 [Reuters] - Eight months of civil war have left Libya's oil industry in chaos, with fields that once pumped a total of around 1.6 million barrels per day (bpd) deserted and export terminals, pumping stations and pipelines damaged by fighting and sabotage.


Much will depend on the damage done to infrastructure and equipment in the last stages of the fighting between forces loyal to Muammar Gaddafi and rebels trying to end his 41 years of rule.

Analysts, oil companies and Western governments worry that the opposition is riven by internal division, which could prompt new fighting after Gaddafi has been removed from power, jeopardizing both post-war recovery and the resumption of oil exports.

War and other traumas in oil producing nations have typically had a lasting impact on output. The speed of recovery in oil output depends crucially on how quickly international companies with highly evolved skills can be brought in.

Following are details of Libya’s oil industry, production and assessments of how long it may take to restore output.

PRODUCTION

* Until the beginning of this year, OPEC member Libya was the world’s 17th-largest oil producer and Africa’s third-largest. It holds the continent’s largest crude oil reserves. It sold about 85 percent of its exports to Europe.

* Oil production was equivalent to about 2 percent of global consumption, but fighting and social disruption have cut this to less than 100,000 bpd. Many oilfields are dependent on foreign workers, who have almost all left the country.

* Most of Libya’s oilfields are around the Sirte Basin, which contains around 80 percent of its proven reserves and spans the front line between rebel and government forces.

* Libya has six major oil export terminals, listed with loading volumes for January from the IEA. Further details are emerging about the condition of these facilities:

– Es Sider (447,000 bpd): Libya’s biggest oil terminal may take more than a year to be fully repaired, according to the head of National Oil Corp Nouri Berouin.

– Marsa El Brega (51,000 bpd): Rebels said in August the only damage at Brega was an oil storage tank on fire.

– Ras Lanuf (195,000 bpd)- The refinery remained out of service by October 3 and would not restart until oil output had climbed to 500,000 bpd within two months, Berouin said. Rebels said in August the oil facilities at the port had not suffered any damages.

– Tobruk (51,000 bpd): Fully operational currently, according to Berouin.

– Zueitina (214,000 bpd): Fully operational currently, according to Berouin.

– Zawiyah (199,000 bpd): Operations at the refinery are resuming and are at half output, according to Berouin.

– other unspecified terminals (333,000 bpd)

REFINERIES

* Libya has five domestic refineries with a total crude distillation capacity of 378,000 bpd: Azzawiya Oil Refining Co (120,000 bpd), Sarir Refining (10,000 bpd), Sirte Oil Co (8,000 bpd), Tobruk Refining (20,000 bpd) and Ras Lanuf Oil & Gas Processing Co (220,000 bpd).

* Reuters calculations show that 130,000 barrels per day of refining capacity is now onstream – a figure that will likely rise to 230,000 bpd once the Zawiyah refinery reaches full output and could rise to 300,000 bpd by year-end if the Ras Lanuf plant restarts.

FIELDS

* Al Jurf: the offshore Total-run 45,000 bpd field was in the process of restarting in September, according to Berouin.

* El Sharara: Berouin said the larger 200,000 bpd Repsol-operated field, deep in the western desert, would begin pumping soon.

* ENI fears that its part-owned 130,000 barrels-per-day Elephant field, its largest in the country, may be in ruins with its airport destroyed along with key electronic structures.

* A source puts the combined output of Sharara and Elephant fields at 450,000 bpd, but the NOC’s Berouin said current production stood at 350,000 bpd.

* Production on ENI’s Abu Attifel field restarted in September, with production reaching 70,000 barrels per day in early October; production at Wafa is also restarted.

* The Bouri field will restart production of both oil and gas by the end of the month.

* AGOCO’s eastern fields of Sarir and Mesla are currently pumping, with traders noting that the first cargo of crude to ship to Asia from Libya was probably Sarir.

* Hamada: Smaller fields like the 15,000 bpd Hamada field will resume production within days, Berouin said, while Nafoora was due to restart on October 5 and Beda on the 15.

* Waha Oil’s Waha and Samah fields are currently not safe, while Gialo suffered a great degree of damage, according to company officials.

* No information has yet emerged on the state of fields such as Dahra, Nasser or Raguba, Beida or Intisar among others.

EXPORTS

* In September, two cargoes of crude oil were exported for Tesoro and Conoco refineries and a third one was sent to Zawiyah refinery for domestic needs, easing the cost of purchasing fuel on the spot market.

* “Some of the oil is going to internal refiners so it will still be a while before we see a real push on exports,” said Olivier Jakob, analyst at Petromatrix.

* A third cargo of condensate, sold to Austrian oil and gas company OMV in early October, was deliveried to the Italian port of Trieste loaded from storage tanks filled prior to the war, Berouin said.

* The same month, European trading company Gunvor booked oil tanker Wilmina to load 950,000 barrels of Libyan crude, according to shipping fixtures. The destination was given as east of Suez, which traders said meant it was likely heading to China.

RESTORATION

* A Reuters poll of 20 analysts and industry officials in July forecast it would take up to one year to restore Libyan output to at least 1 million bpd but up to two years to get back to pre-civil war levels of 1.6 million bpd.

* The chairman of the NOC Nouir Berouin reiterated that it could take up to 15 months for output to return to pre-war levels, although many analysts have been surprised by the speed with which operations have resumed.

* Consultants Petroleum Policy Intelligence estimated that output could reach 1 million bpd by the end of November.

* FACTS Energy analysts expects Libyan crude production to rise to 800,000 bpd by the end of this year and to return to the pre-crisis level of 1.6 million bpd by end-2012.

* Oil industry consultancy Wood Mackenzie said it would take around 36 months for the country to recover its full production capacity, from whenever the crisis is resolved. It estimates that substantial oil volumes could be back in the market by late 2012 if a resolution is achieved by the end of 2011. But the recovery period will extend if production remains shut-in for longer, as infrastructure continues to deteriorate.

* Samuel Ciszuk, senior Middle East & North Africa energy analyst with IHS Energy, said oil output could theoretically be restored in 18 months but that this would be the most optimistic scenario.

* “The ramp-up stage (of oil production) is where quick decision-making will be needed most and where the recovery could be derailed from the very good pace at which is has initially picked up,” said Ciszuk. “We said from the beginning the main challenge might be the ramp-up, rather than the re-start so most of that is still to be seen.”

* In August, the longest forecast for a full recovery of oil output came from David Wech, head of research at Vienna-based consultants JBC Energy. He said a return to full output capacity could take three to four years because significant investment in infrastructure would be necessary.

LIBYAN OIL COMPANIES

* Libya’s oil industry was formerly run by the state National Oil Co, which accounted for around 50 percent of the country’s output.

* The NOC plans to resume marketing within the next month, although some subsidiaries have expressed resistance to the idea of an all-powerful NOC. The future division of responsibilities between the NOC and the oil and finance ministry, headed by Ali Tarhouni, is unclear. Earlier plans to form a separate oil ministry for shaping policy appear to be floundering.

FOREIGN OIL COMPANIES

* Foreign oil firms, essential for the quick resumption of production, have spoken to rebels at length, but the future of existing contracts with Gaddafi’s government is uncertain.

* Italian producer ENI, present in Libya since the 1950s, is the biggest foreign oil company there, producing 270,000 boed (barrels of oil equivalent per day) in 2010. Its contracts are in force to 2042 for oil production, but it is not yet clear if they would be honored by any future government.

* The total equity share of the following foreign companies — many of which operated fields on behalf of Libya’s National Oil Co — amounted to almost 500,000 bpd before the conflict began. The legal status of contracts after the civil war will need to be clarified.

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