Libya War Rivals Poised for Unity Talks as Oil Output Rises

Libya Oil Output Set for 1 Million Barrels Daily as Ports Reopen

Libya’s push to almost double crude output could gain momentum as rival sides prepare for a new round of talks aimed at ending a nearly decade-long conflict that has ravaged the OPEC member.

The United Nations said Sunday that political discussions targeting a deal on a “unified governance framework” for the North African country will begin Oct. 26 via video conference. Face-to-face meetings will kick-off in Tunisia on Nov. 9.

The UN announced the discussions two days after Libya’s state-run National Oil Corp. said daily crude production would rise above 1 million barrels in the next four weeks, now that the last of the nation’s oil ports have reopened.

Increased output and exports are critical for an economy hammered by fighting between the UN-recognized government in Tripoli, headed by Prime Minister Fayez al-Sarraj, and his eastern rival, military commander Khalifa Haftar. Libya holds Africa’s largest crude reserves.

The goal of the political talks “will be to generate consensus on a unified governance framework and arrangements that will lead to holding national elections in the shortest possible timeframe,” the UN’s acting envoy, Stephanie Williams, said in a statement. Rival Libyan military leaders signed a permanent ceasefire agreement last week.

Williams commended al-Sarraj’s “courageous announcement” of his intention to step down and expressed hope he would stay on until “the way forward” is decided. Al-Sarraj had said he would quit by the end of October.

A degree of stability is essential for Libya to sustain the increase in its oil production over the past few weeks. The NOC said on Friday that it lifted force majeure -- a clause in contracts allowing deliveries to be suspended -- at the eastern ports of Es Sider, Libya’s biggest export terminal, and Ras Lanuf. It’s safe now to restart operations after months of shutdowns because foreign fighters involved in the country’s civil war have left the areas, the company said in a statement.

Resuming Production

The Al Nafoura and Amal fields, which feed Ras Lanuf and have a combined capacity of around 90,000 barrels a day, have already restarted, people familiar with the matter said. The El Feel, or Elephant, field is scheduled to resume production in a week, according to a person familiar with the matter.

The rapid resumption of Libya’s production following a truce has added pressure on crude prices, just as a resurgence of the coronavirus saps demand for energy. Brent crude dropped 1.6% to $41.77 a barrel on Friday, extending its decline in 2020 to 37%.

READ: What’s Next for Libya’s Oil Surge as War Rivals Talk Peace

Libya pumped less than 100,000 barrels a day before Haftar lifted a blockade of oil facilities in September. Daily output reached 560,000 barrels last week and would rise to 800,000 within a fortnight, the NOC said. The company won’t be able to pump at last year’s levels of around 1.2 million barrels a day due to damaged infrastructure and budget constraints, it said.

If Libya’s daily output rises to 1 million barrels as quickly as the NOC says, that will add to the challenge for the OPEC+ producer alliance, which is trying to curb global crude supplies and bolster prices. The coalition of the Organization of Petroleum Exporting Countries and partners including Russia meets next month to decide on policy.

OPEC+ is weighing whether to delay a plan to ease production cuts in January. Even its worst-case analysis of the market didn’t anticipate such high Libyan output until late 2021. Libya is exempt from production curbs due to its strife.

©2020 Bloomberg L.P.

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