Libya Announces 204% Increase in Oil Exports in November

Continuing production at this pace depends on whether the peace will last

The exports of Libya’s National Oil Company (NOC) rose in November by 204% over the previous month, to $700.4 million, the firm announced on Saturday.

This still lags behind the $1.66 billion in revenue from the export of crude oil, gas and condensates, petroleum products and petrochemicals registered in November 2019.

The NOC also declared on Friday that the country would continue to receive exemptions from OPEC output regulations, despite having made production increases for six months according to Reuters, a surprise to some analysts.

“The [OPEC] Conference welcomed the resumption of oil production by Libya and reaffirmed its exemption from the production adjustments, as the country is in desperate need of funds to overcome its commercial and social difficulties,” the NOC said in a press release.

However, whether Libya’s increased production, which has reached between 1.2 million and 1.25 million barrels per day (bpd), is truly welcomed by all OPEC members is debatable.

Whether Libya will be able to maintain production at this level depends on the political situation on the ground, analysts say.

The NOC release also noted that starting next month, OPEC+, which was formed in 2016 and consists of the 13 OPEC members and 10 additional oil-exporting countries, led by Russia, will boost oil production by 500,000 bpd.

Besides Libya, Venezuela and Iran are also not subject to restrictions on production introduced earlier this year due to a COVID-induced drop in demand for oil.

“Some countries which face a problem meeting their quotas, because of disruptions and civil unrest in the case of Libya, or the sanctions against Iran, these countries can argue that they were not able to meet their quotas and other people took advantage of it, so, therefore, they’re entitled to produce at whatever level they can,” Nassir Shirkhani a former Middle East correspondent for Upstream, an international oil and gas newsweekly and website, told The Media Line.

Dr. Jeff D. Colgan, a professor at Brown University and author of the book Petro-Aggression: When Oil Causes War, with a large focus on Libya, says these exemptions highlight the limits of OPEC.

“OPEC is an organization that is very weak in terms of being able to enforce the agreements it makes. It’s always struggled with this issue of compliance with agreements because … it does not have a lot of tools to enforce agreements when they’re made,” he told The Media Line.

“Also, the agreements themselves are made by the same countries that are going to supposedly comply with them, so they can always set agreements that are in line with what they were going to do anyway.

“There is nobody in Libya who is willing to accept restrictions on Libya’s output because the country desperately needs the money and so they are just uninterested in OPEC’s limits,” Colgan added.

Libya has not been subject to OPEC’s production limits in recent years because of the civil war it has been embroiled in since 2014.

Production has recently increased due to a cease-fire between the Government of National Accord, which the international community recognizes as Libya’s governing body, and the Libyan National Army of Gen. Khalifa Haftar, who decided in June to stop its six-month blockade of the country’s oil fields. During the blockade, Libya’s oil production fell to as low as 100,000 bpd.

“Production has gone up rapidly because the warring sides decided [on] a cease-fire. Whether this is going to continue or not is a big question. … In order for them to sustain this output, they would have to invest a lot of money in upgrading and repairing damaged facilities,” Shirkhani said.

Colgan said this investment will come from foreign sources if the conflict does not escalate from its current level.

“If the political situation is sufficiently stable and the Libyans want foreign investment, then I think they will attract it because there are very attractive oil fields there and companies know there is money to be made,” he said. “But the key X-factor for Libya’s oil industry is the political situation, whether it is stable in terms of security.”

Shirkhani said the cease-fire was by no means secure.

“The powers involved in the Libya conflict still have diverging interests on how to compromise. … These guys haven’t really sat down to resolve the problem once and for all, so the outlook is very uncertain. You can’t really bet on how long this cease-fire will last,” he said.

The United Arab Emirates supports Haftar’s forces. Turkey, though not a member of OPEC, is the government’s fiercest ally.

Some analysts such as Jason Pack, a nonresident fellow at the Middle East Institute and president of Libya-Analysis LLC, told The Media Line Libya’s uptick in oil production was surprising.

“No one could have thought, certainly the markets didn’t think, that when Haftar would lift the blockade, that they could get back to 1.2 [million bpd] so quickly because we all know about the rusting of the infrastructure, we know there are not enough storage tankers at [the] Ras Lanuf [oil port, due in part to a 2018 fire]. How was this possible?” he asked.

However, for Shirkhani, Libya’s production swell is not a shock.

“It was not a real surprise because the facilities have been damaged, but not extensively, because both sides obviously need oil revenues. … They have absolutely no interest in damaging revenue and oil facilities on a long-term basis because if they come to power, they will need them,” he said.

Some of the OPEC members who welcomed Libya’s production boost are proxy actors in Libya’s civil war.

“The practical effect of the civil war in Libya going on for a long time has been to keep Libya’s oil production down, and that’s beneficial to other oil producers like the Emiratis or Saudis,” Colgan said.

“Whether they intended to or not, what the civil war was doing was helping OPEC restrict production,” he said.