Libya’s as­cen­dant oil boss poses chal­lenge for OPEC, Rus­sia

Muscat Daily - - BUSINESS -

Lon­don, UK - Libya’s re­bound­ing oil out­put is un­der­min­ing the sup­ply curbs mas­ter­minded by Saudi Ara­bia and Rus­sia. But any pleas for the OPEC mem­ber to ex­er­cise re­straint will prob­a­bly be re­sisted by the tech­no­crat over­see­ing the North African na­tion’s turn­around.

Pro­duc­tion has climbed to a four year high of 1.1mn bar­rels a day, with Libya ad­ding out­put since April that’s equiv­a­lent to more than a quar­ter of the cuts agreed by OPEC and its al­lies.

The restora­tion of Libyan oil sup­ply has put the spot­light on Na­tional Oil Corp (NOC) chair­man Mustafa Sanalla, whose in­flu­ence has waxed in a coun­try di­vided be­tween a weak United Na­tions-backed gov­ern­ment and a mil­i­tary strong­man. When OPEC meets with Rus­sia in St Peters­burg this week, the 56 year old petro­chem­i­cal en­gi­neer will speak for a na­tion that’s caus­ing as much angst as US shale drillers.

“Sanalla has be­come the cen­tral fig­ure in the oil and gas sec­tor,” Ge­off Porter, founder of the North Africa Risk Con­sult­ing, said in an in­ter­view. “His job is to pro­duce as much oil as pos­si­ble while he can and I think that’s what he is go­ing to con­tinue to try to do.”

When OPEC, Rus­sia and other pro­duc­ers agreed last De­cem­ber to cut pro­duc­tion to boost prices, Libya eas­ily se­cured an ex­emp­tion. The na­tion with Africa’s big­gest oil re­serves was pump­ing about half a mil­lion bar­rels a day of crude, less than a third of its pre-con­flict ca­pac­ity.

Libya was off the radar, skip­ping OPEC meet­ings and not pro­vid­ing the group with monthly pro­duc­tion data. Now, with out­put sur­pass­ing the sym­bolic 1mn bar­rels-a-day mark, OPEC mem­bers want Libya at the ta­ble in St Peters­burg. While it’s un­clear if Libya will send a rep­re­sen­ta­tive to the min­is­ters’ meet­ing on Mon­day, Sanalla will at­tend a tech­ni­cal meet­ing two days ear­lier.

Libya will share with the com­mit­tee ‘the fac­tors en­abling and con­strain­ing’ its re­cov­ery in out­put, Sanalla said in a state­ment on Tues­day.

As for join­ing the sup­ply curbs and while Ecuador deals a blow to OPEC unity, Sanalla has pre­vi­ously hinted that Libya’s chal­lenges won’t make that easy.

“Libya’s po­lit­i­cal, hu­man­i­tar­ian and eco­nomic sit­u­a­tion needs to be taken into ac­count if we are go­ing to talk about pro­duc­tion caps,” Sanalla said in a July 11 state­ment, fol­low­ing sug­ges­tions from other OPEC mem­bers that the coun­try could be asked to curb out­put.

Sanalla’s grow­ing stature in a di­vided coun­try was on dis­play last month in an opin­ion piece in the New York Times, where he urged the NOC to re­main aloof from the na­tion’s in­ter­nal pol­i­tics.

With the NYT piece and the na­tion’s surg­ing oil out­put, Sanalla ‘demon­strated to the other stake­hold­ers in Libya that he has the in­ter­na­tional stand­ing that al­most any­one else lacks’, said Mat­tia Toaldo, se­nior pol­icy fel­low at the Euro­pean Coun­cil on For­eign Re­la­tions.

Power bro­ker

“Sanalla is a mix be­tween a diplo­mat-in-chief and an oil min­is­ter in the Saudi tra­di­tion, who used to do big diplo­macy mostly through oil,” Toaldo said.

Last month, Sanalla met with both Al­ge­ria’s en­ergy and for­eign af­fairs min­is­ters, dis­cussing how Al­ge­ria could help unify bel­liger­ent fac­tions ‘to sta­bilise the coun­try and its econ­omy’, ac­cord­ing to the state-owned Al­ge­rian Press Ser­vice.

Sanalla, who was born in 1961 in the east­ern city of Benghazi and is to­day work­ing at the NOC head­quar­ters in the cap­i­tal in the west, has sought to re­main neu­tral through Libya’s po­lit­i­cal tur­moil. Af­ter a ca­reer in state re­finer­ies, he took over the NOC lead­er­ship in May 2014. He is cred­ited for re­assert­ing the au­thor­ity of the Tripoli-based NOC against at­tempts by east­ern par­ties to sell oil in­de­pen­dently. Un­der his ten­ure, Libya has signed con­tracts with in­ter­na­tional com­pa­nies, ended a block­ade of its ports and in­creased pro­duc­tion more than four­fold from 250,000 bar­rels a day.

In­deed, rather than cap­ping pro­duc­tion, the head of the state-owned oil com­pany is more con­cerned about boost­ing out­put fur­ther. When Rus­sia’s Ros­neft PJSC signed a deal in Fe­bru­ary to in­vest in ex­plo­ration and pro­duc­tion in Libya, the NOC said it was part of its goal to in­crease out­put to 2.1mn bar­rels a day by 2020.

That de­ter­mi­na­tion to in­crease oil out­put stems from the eco­nomic hard­ship Libya has ex­pe­ri­enced since the state col­lapsed fol­low­ing the 2011 revo­lu­tion that top­pled dic­ta­tor Moam­mar Gad­hafi.

The econ­omy has con­tracted for the past three years, a dis­tinc­tion it shares only with Ye­men - a coun­try en­gulfed in a civil war - among 11 oil ex­porters tracked by the In­ter­na­tional Monetary Fund in the re­gion span­ning the Mid­dle East, North Africa, Afghanistan and Pak­istan. Libya is the only OPEC mem­ber in the Mid­dle East and North Africa to have seen the oil price it needs to bal­ance its bud­get in­crease since 2014.

While Sanalla has am­bi­tions to boost pro­duc­tion, the coun­try may al­ready be bump­ing up against a short-term ‘ im­plicit’ ceil­ing that’s slightly above 1mn bar­rels a day, ac­cord­ing to Toaldo. Un­til in­vest­ment raises ca­pac­ity fur­ther, that means a cap at around that level might be pos­si­ble, he said.

Mustafa Sanalla

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