Libya might re­sume oil ex­ports. Will we no­tice?

Arab News - - Business - FRANK KANE Frank Kane is an award-win­ning busi­ness jour­nal­ist based in Dubai.

If all goes well for war-torn Libya, some­time in the next few days the oil tanker Delta Hel­las will load 1 mil­lion bar­rels of oil from the east­ern ter­mi­nal port of Hariga and head off to­ward the Suez Canal en route to China with its cargo, worth about $42 mil­lion. But there are so many big ifs at­tached to that prospect as to make it un­likely, and more un­likely still is that the Delta Hel­las will be the first of many tankers tak­ing oil from Libya for the first time since early this year.

Even less likely — to the point where it is hardly worth the time of oil in­dus­try strate­gists to con­sider — is that a re­sump­tion of Libyan ex­ports will up­set the care­ful ef­forts of en­ergy pol­i­cy­mak­ers at OPEC+ to re­bal­ance the frag­ile global oil mar­ket.

The no­tion that Libya could start ex­port­ing oil again has only be­come fea­si­ble be­cause

Khal­ifa Haf­tar, the mil­i­tary com­man­der who con­trols most of the east of the coun­try where most of the crude is pro­duced and ex­ported, has done a deal with some el­e­ments of the Tripoli-based gov­ern­ment in the west.

Haf­tar has agreed with Ahmed Maiteeg, deputy prime min­is­ter in Tripoli, that the east­ern ports are safe and se­cure enough to restart oil ex­ports. The two men have re­port­edly agreed to share the pro­ceeds of the trade, un­der the su­per­vi­sion of a joint com­mis­sion.

But there are all sorts of flaws in that plan.

One is that Hariga and two other ports in the east could eas­ily suc­cumb to vi­o­lent law­less­ness again at any time. Libya is rife with heav­ily armed mer­ce­nar­ies and war­ring fac­tions that could come to blows at the drop of a hat, not least over the is­sue of oil money.

An­other ob­sta­cle is that the coun­try’s oil in­dus­try has been badly dam­aged by the in­ten­si­fied fight­ing it has suf­fered re­cently. With no uni­fied gov­ern­ment, it is hard to imag­ine the kind of ef­fort Saudi Ara­bia put in place af­ter the at­tacks on Abqaiq and Al-Khu­rais last year that got pro­duc­tion and ex­ports back in record time.

Even if ex­ports re­sume and rev­enue be­gins to flow again, there is no agree­ment on where it will go. The Cen­tral Bank of Libya is the only body au­tho­rized to re­ceive pro­ceeds from the coun­try’s na­tional oil com­pany, and it is not party to the Haf­tar-Maiteeg deal. Nor is the na­tional oil com­pany, which legally owns the oil, nor other es­sen­tial par­ties in the Tripoli ad­min­is­tra­tion.

If by some huge slice of luck and good gov­er­nance — nei­ther of which Libya has in abun­dance — pro­duc­tion is re­sumed and sus­tained, it would not do much to al­ter the global oil bal­ance. An­a­lysts at Gold­man Sachs — stick­ing res­o­lutely to their fore­cast of $65 per bar­rel by the sec­ond half of 2021 — have cal­cu­lated that with ev­ery­thing go­ing its way, Libya might soon be able to ex­port 400,000 bar­rels per day (bpd).

This is a big jump on the 100,000 or so that have been leav­ing the coun­try since Jan­uary, but not much in the over­all cal­cu­la­tions of OPEC+, which has ig­nored Libyan pro­duc­tion in its monthly as­sess­ments since the be­gin­ning of the year. It is way off the 1.2 mil­lion bar­rels the coun­try was pump­ing be­fore its cur­rent trou­bles.

An ex­tra 400,000 bpd and ris­ing might need some fi­ness­ing by OPEC+ an­a­lysts to ac­com­mo­date into their fig­ures by the end of the year, but it would be largely a round­ing er­ror in to­tal OPEC+ pro­duc­tion of well over 30 mil­lion bpd.

It would also be more than com­pen­sated if com­pli­ance to the agreed cuts regime con­tin­ues at re­cent his­toric lev­els, and com­pen­satory re­duc­tions come through by the end of the year.

OPEC+ has a lot of is­sues on its plate: Un­cer­tainty about oil de­mand re­cov­ery in the face of a sec­ond wave of the COVID-19 pan­demic, en­sur­ing com­pli­ance with the cur­rent agree­ments, and pos­si­ble oil mar­ket volatil­ity as traders re­act to a whole ar­ray of geopo­lit­i­cal and global eco­nomic vari­ables.

But the dis­tant prospect of Libya re-emerg­ing as a force in the oil world is not likely to cause much con­cern.

Libya is rife with war­ring fac­tions that could come to blows at the drop of a hat, not least over oil money.

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