The Arab Petroleum Investments Corporation (APICORP), the multilateral development bank focused on the energy sector, published a report today focusing on the increasingly important role that Libya can play in stabilising the oil price as its production starts to ramp up towards levels not seen since the revolution in 2011.
A near-doubling of output between July and October, to 1.28 million barrels per day (mbpd), came just as Libya’s fellow OPEC members sought to lift production to offset losses elsewhere and keep global supply balanced. This compares with output of almost 1.6mbpd on the eve of the revolution in 2011.
Since then, production has oscillated within a wide band, dropping as low as 200,000bpd and topping out at around 1.4mbpd. It is possible this could rise further, providing the necessary investment is made in repairing infrastructure, which itself will require a return of political stability.
APICORP noted four advantages that Libya has as an oil producer. It has substantial reserves, at more than 48bn barrels, or just under 3% of the world’s total. The deposit is Africa’s largest, and Libya enjoys a reserves-to-replacement ratio of 153 years.
Additionally, Libyan oil is relatively easy to extract, and the installation of production and export infrastructure has typically been straightforward. Libya’s oil streams mainly offer sweet, high-quality crude oil that can command a premium in international crude oil markets. Libya’s oil is also close to major consumer centres. Sailing times to European ports, which take the bulk of Libyan crude-oil exports, range from two days to Sardinia to 11 days to Rotterdam, compared with close to a month for Asian destinations.
“Libyan oil is now well placed to play a role in stabilising global balances," said Mustafa Ansari, senior economist at APICORP. "Its proximity to key markets and huge upstream potential mean a geologically prolific oil province awaits investors. However, this requires political stability, and the outlook is favourable, with recent discussions between groups in the country offering the chance for a lasting settlement in the country. Libya remains a crucial global supplier, with a significance to the world’s oil market far beyond its Mediterranean shores. A better investment climate, is however, needed for the country to fulfil its substantial upstream promise.”
Volatility in output was the result of different political factions exerting control at different times and restricting the supply of oil to gain leverage. However, with the Libyan National Oil Company regaining overall control, production has now increased significantly. Oilfield service activity has resumed and there has also been an increase in drilling, with international companies such as BP, ENI, Gazprom and Schlumberger all committing to the country’s oil sector.