Libya seeks to ramp up oil output to 1.3 million barrels by early 2021

Output at Libya’s biggest field of Sharara is expected to rise to 245,000 barrels per day this week as the security situation improves

A view shows the Zueitina oil terminal, after oil exports resumed in the west of Benghazi, Libya. Reuters

Libya, an Opec+ member and home to Africa’s largest crude reserves, is accelerating its oil production with plans to increase output to 1.3 million barrels per day by early 2021, as a truce to a civil war holds, according to the chairman of the country's state energy firm.

Daily crude output has reached 800,000 barrels and Libya will ramp up output to 1.3 million bpd by the beginning of 2021, Mustafa Sanalla, the chairman of the National Oil Corporation (NOC) told Bloomberg.

The North African country's production dwindled to less than 100,000 bpd in early September from about 1 million bpd last year due to a civil war. The country turned a page following an agreement struck in Geneva last month, which paved the way for the resumption of oil production in different fields including the country's biggest oil field Sharara and the eastern Waha oil field.

Rival sides are set to meet next month in Tunisia to appoint a unity government that will prepare elections.

The NOC plans to increase Libya’s output to 1.6 million barrels daily, around the same level as before the 2011 uprising that ousted former dictator Muammar al Qaddafi, by the end of next year, Mr Sanalla said. The increase in output will depend on the NOC getting enough money from the government to repair damaged and neglected infrastructure, he added.

The return of Libyan crude is expected to put downward pressure on oil prices, which are already trading lower as a result of concerns related to lower energy demand and higher inventories because of a resurgence in coronavirus infections globally.

Brent, the international benchmark for crude, was down 3.27 per cent, to trade at $36.70 per barrel at 9:24am UAE time on Monday. West Texas Intermediate, the key gauge for US oil, was down 3.69 per cent at $34.47 per barrel.

"The phoenix-like bounce back in Libyan crude production, which comes at an inconvenient time with rising Covid-19 cases in Europe and the US, is rattling oil markets and threatening to disrupt the delicate rebalancing in fundamentals," Ehsan Khoman, director, head of MENA research and strategy at MUFG Bank, told The National.

Investors are also closely watching developments in the US presidential elections this week.

"Once the dust settles surrounding the US elections this week, investor attention will turn to the Opec+ meeting at the end of this month, and whether the resurgence of Libyan oil output back to similar levels last witnessed in 2012-13, alongside the renewed mobility restrictions across Europe, will propel the group to delay the next phase of its tapering of production cuts due to commence in January," Mr Khoman added.

Opec+, the producer alliance led by Saudi Arabia and Russia, agreed to historic curbs of 9.7 million bpd between May and July, after the pandemic-induced mobility restrictions forced energy demand to plummet to record lows. The group plans to taper cuts and has been holding back 7.7 million bpd from August to help balance demand and supply. Production is set to increase again in January as part of the gradual easing of supply curbs.