(Bloomberg) -- Libya is pumping 715,000 barrels a day of oil, the most since 2014, and is on track to keep boosting output this year as the country restores much of the production lost amid political chaos and conflict, the state oil company’s chairman said.
Blockades at the North African state’s main oil ports have ended, and output may reach 1.25 million barrels a day by the end of 2017, National Oil Corp. Chairman Mustafa Sanalla said Tuesday at a conference in London. Additional production may create a challenge for OPEC and other major suppliers that agreed to pump less crude starting Jan. 1 in an effort to end a global glut.
“Every single major oil-export route is now open, although some are operating at significantly reduced levels due to damage suffered in conflicts,” Sanalla said, according to the text of his speech. “For the moment the oil is flowing. This can be an important foundation of stability in Libya, if we build on it.”
Libya, with Africa’s largest crude reserves, is trying to revive its oil production and exports in spite of continuing political uncertainty. Last month it re-opened its biggest oil field, Sharara. The production figures Sanalla announced represent a 23 percent increase from the 580,000 barrels a day that Libya pumped in November, according to data compiled by Bloomberg.
The country pumped 1.6 million barrels a day before a 2011 revolt set off years of fighting between rival governments and militias. The Organization of Petroleum Exporting Countries exempted Libya from cutting output as the nation works to restore its oil industry.
The Sharara field, operated by Repsol SA, is pumping about 153,000 barrels a day, and NOC is targeting output there of 250,000 barrels a day by May, Sanalla said Tuesday in an interview in London. The Eni SpA-run El-Feel field remains shut, he said. El-Feel, or Elephant, was also due to re-open in December but guards demanding benefits prevented that, NOC said earlier this month. The two fields in western Libya have a combined capacity of 450,000 barrels a day.
Production from western Libya is “highly unstable,” and the risk of attacks on oil facilities in that region is significant as opposing groups try to negotiate a political settlement, Fitch Group Inc.’s BMI Research said in a report dated Tuesday.
Output in the east is more stable, and the country’s total output as of Tuesday was 640,000 barrels a day, BMI Research said. It forecasts that Libya will pump an average of 688,000 barrels a day in 2017, up from a previous estimate of 457,000, based on restored production at western fields.
Benchmark Brent crude slid 0.3 percent in London on Wednesday to $55.25 a barrel at 9:31 a.m. local time. It has dropped 2.7 percent this year.
“Libyan oil production today stands at 715,000 barrels a day, the highest level in three years,” Sanalla said.
According to Bloomberg calculations, current production is the most since October 2014, when Libya pumped 850,000 barrels a day.
Libya needs investment of $100 billion to $120 billion to rebuild its oil industry, Sanalla said.
“We intend in the coming months to lift our self-imposed moratorium on foreign investment in new projects,” he said. “We have been waiting for a legitimate government with a mandate from the people to come to power to do so, but we can wait no longer.”
The UN-backed Government of National Accord, based in Tripoli, has the sole authority to export Libyan oil, but forces loyal to Khalifa Haftar, a military commander based in the east of the county, control the major oil ports, Sanalla said. While each side has a key to Libya’s “treasure room,” both keys are needed to to open the door, he said.
BMI Research said the high level of risk will remain a major deterrent investment this year in Libya. “The question is not so much the volume of output that can be reached, but rather how long it can be sustained for,” it said.
(Updates with analyst comment in seventh, eighth paragraphs; oil price in ninth.)
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