Libya is unlikely to see an immediate boost to its crude output despite signs of a political breakthrough allowing key oil ports to reopen, analysts said Monday, given that several other factors need to be resolved.
Production remains dependent on matters ranging from technical issues in oil fields, the state of the closed oil terminals, and the politics surrounding the web of factions operating in the country.
On Sunday, state-owned National Oil Corp. welcomed an announcement by the UN-backed government of the reopening of the 340,000 b/d Es-Sider, 220,000 b/d Ras Lanuf, and 75,000 b/d Zueitina oil facilities, after reaching a deal with Petroleum Facilities Guards who control the ports.
Analysts noted that not only were details of that deal not fully revealed, the agreement will also have to be made to resume pumping at associated fields controlled by tribes aligned to other groups.
Indeed, NOC chairman Mustafa Sanalla said in a statement there were "still big military, political and legal obstacles" to be resolved.
"Clearly the headlines are bearish for oil, which has already been heading steadily lower in recent weeks," Energy Aspects geopolitical risk analyst Richard Mallinson said.
"But I think we will need to watch developments in Libya closely for a few more weeks to determine if this really does represent a breakthrough or not. ... Even if that [resumption of pumping from oil fields] can be managed, there is the damage to the terminals, which I think would limit exports to 200,000-300,000 b/d at most," he said.
NOC CHANGES TONE
The NOC said it hoped to increase production by 900,000 b/d by the end of the year and will work with the government to restart exports from ports that were closed and from fields that supply them.
"NOC will immediately start technical works, and we will mobilize workers as quickly as possible," Sanalla said.
"On top of that, NOC will open discussions with our international oil company partners to indemnify NOC from liability before lifting the force majeure."
That was a change in approach from Sanalla, which two weeks ago said the potential agreement to open the ports would set a "terrible" precedent as it would "encourage anybody who can muster a militia to shut down a pipeline, an oil field, or a port, to see what they can extort."
The government had not paid the PFG to open the ports, but had only paid overdue salaries, Sanalla said, adding other groups should using a blockade as a tactic to unite to "let Libya's oil flow freely."
"We need other blockaders also to understand the blockade is not a tactic that benefits anybody. ... Blocking oil flows harms everybody, including the blockaders," he said.
Issues around oil production, port strikes and the rise of the Islamic State along Libya's Gulf of Sidra -- home to two of the country's largest export terminals and its largest refinery at Ras Lanuf -- has made progress slow in terms of returning the country to its 1.5 million-1.6 million b/d pre-crisis oil output.
Production rose as high as 380,000 b/d in early 2016 -- still a fraction of the country's previous output -- has fluctuated significantly due to issues such as electricity generation outages at oil fields and stoppages of pipeline output due to militia activity.
The country's oil production was 310,000 b/d in June, according to S&P Global Platts data.
Oil output levels in 2015 were also volatile, with a peak above 600,000 b/d in March and an overall average of around 400,000 b/d -- compared with output of 460,000 b/d in 2014 and 920,000 b/d in 2013.
