Libya Peace Deal Expected to Restore Oil Output

Libya Peace Deal Expected to Restore Oil Output

The UN-backed deal signed between Libya’s two rival factions in Morocco on December 17th is to create a unity government to help recover stability in the divided country, and counter the threat of Islamic State militants,  Al Jazeera reported.

The peace agreement is also expected to pave the way for shuttered oil fields and export terminals to be reopened. Following the peace deal, the National Oil Corporation (NOC) affiliated with the internationally recognized government in eastern Libya announced it would sign agreements with six companies to sell crude oil, according to GulfNews.

The ongoing strife has slumped oil output by almost 80% since 2011. According to data compiled by Bloomberg, Libya pumped 375,000b/d in November 2015. The Central Bank and state oil company have been facing difficulties to manage economy of the country heavily dependent on crude, Reuters reported.

Experts consulted by Bloomberg said that even with the peace deal, the North African nation would struggle to restore its oil production to the pre-2011 levels. They added that any additional Libyan output would feed a glut that had seen oil prices slump by more than 65% since June 2014. According to analysts at the Energy Aspects Ltd., a lasting peace deal may allow  Libya to ramp up its output, but a threat from Islamic State may worsen the situation.

Wintershall Holding GmbH, which operates eight onshore oil fields in the eastern Sirte Basin, said it would take time and patience for Libya to find stability. Wintershall was forced to suspend its oil exports from the As-Sarah field in November, because the Zueitina terminal was unable to load cargoes.

According to Standard Chartered Plc’s analyst, it is a long way from signing an agreement between the two rival governments to the restoration of the Libyan oil industry to its full capacity, as there still exist splits within the regional governments and their affiliated insurgent groups, Bloomberg informed.

The rival factions – that emerged after the 2011 uprising against Muammar Qaddafi’s 42-year rule – agreed to end years of violence. However, according to observers cited by Al Jazeera, concerns remain about the willingness of existing armed groups on the ground to comply with the terms of the deal.

Libya has had two administrations since 2011; a Tripoli-based government in the west, and an internationally recognized government in the eastern city of Tobruk. The NOC in the west is recognized as the official marketer of the Libyan oil by traders such as Glencore and Vitol Group . The eastern government has set up a separate NOC administration, which represents Libya in matters relating to oil including the Organization of the Petroleum Exporting Countries (OPEC).


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