Libyan oil production has potential to cross 1 million barrels per day

The chairman of the Libyan National Oil Corp. said there are no technical obstacles to substantial gains in crude oil production.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Updated May 10, 2017 at 9:25 AM
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May 10 (UPI) -- Libya has the technical potential to produce as much as 1.2 million barrels of oil per day, though commercial and security issues interfere, an oil leader said.

Mustafa Sanalla, the chairman of the Libyan National Oil Corp. said the current crude oil production rate of 800,000 barrels per day is the best output since 2014. Libya is exempt from an agreement coordinated by the Organization of Petroleum Exporting Countries to balance the market through managed production declines and the chairman said national security issues and contractual disputes with European partners were impeding further growth.

"There are no technical reasons for the loss of production," he said in a statement. "We are able produce an average of 1.1 million to 1.2 million barrels per day for the rest of the year, but for this to happen, our oil must flow freely."

Ole Hansen, the head of commodity strategy at Saxo Bank, said this week that Libyan gains could undermine OPEC's efforts because of the country's slow, but steady, gains so far this year. OPEC data, using secondary industry sources, show Libyan crude oil production for the first three months of the year averaged 660,000 barrels per day, against a fourth quarter average of 574,000 barrels per day.

After restarting the Sharara oil field in late April, the NOC said there may be long-standing agreements in place to keep the taps open. The Sharara oil field has operated in fits and starts as Libya tries to push the momentum on the national security front toward the side of peace. It was closed once in April already after restarting just weeks before that.

The NOC director said that, apart from national security issues, a contractual dispute with German energy company Wintershall was holding some of the nation's oil back.

"We would be producing almost 1 million barrels per day if it were not for Wintershall's refusal to implement terms it agreed to in 2010," he said.

Wintershall has legacy operations in Libya and was one of the first to resume operations in the wake of the downfall of Moammar Gadhafi.

A spokesperson for the German company told UPI talks with the Libyan company were ongoing, but its commitments were strong.

"Wintershall has always met its obligations towards the Libyan state," he said. "More than that: We are engaged in the country for nearly 60 years and have since been maintaining a special and trustful bond with our Libyan partners – even throughout difficult times."

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