Libya Oil Sector Recovery El-Sharara Oil FieldLast week, for the first time since February, all of the country’s major oilfields and export terminals were operating; a small but necessary recovery for Libya’s oil sector. The El Feel (Elephant) field resumed production on 23 July for the first time since late February. El-Sharara also ramped up production to around 200,000 b/d on 25 July following a visit from National Oil Corporation (NOC) chairman Mustafa Sanalla, which led NOC to consider lifting the force majeure at the Zawiya terminal. Total output rose to around 850,000-900,000 b/d which is almost the same level it was before the Oil Crescent crisis unfolded in June. Incremental improvements in the next few weeks are expected to push production back above 1.0 million b/d.
This is welcome news and especially to Italy. During the Oil Crescent crisis, Italy had to resort to importing more US crude oil as a direct result of the crisis. The US Congress allowed exports of US crude oil for the first time in four decades in late 2015. Libya typically exports 313,000 b/d to Italy but this fell to 115,000 b/d in June.
There are also indications that the GNA is finally making the necessary investments to cope with the electricity shortages that sparked protests in July. GNA Spokesman Mohamed el-Sallak noted in his weekly press conference on 24 July that the Presidency Council had paved the way for the General Electricity Company of Libya (GECOL) to directly award a €33.3 million (US$38.83 million) contract to GE to maintain and develop gas units at power stations. He also indicated that the GNA was finally ready to disburse funds for contracts that GECOL has with Siemens and Turkey’s ENKA Teknik to improve power supplies.
The risks that have increased the volatility in the power and oil sector have not been resolved. The GNA government in Tripoli is still unable to pay consistent salaries to unaccountable guards. Criminal groups will still seek to kidnap the oil sector and GECOL-affiliated workers, especially foreigners, in order to obtain large ransom payments. Meanwhile critical infrastructure continues to crumble due to neglect, vandalism, and war. And importantly, the oil sector remains a political weapon, as it has since Ibrahim Jedhran disrupted eastern installations in 2013.
