Can Libya’s Oil Industry Make A Comeback In 2021?
Posted – 12th May 2021
The creation of Libya’s interim government has instilled the international community with tacit hopes of a decade-long conflict finally coming to an end. As it is oftentimes the case with Libya, aspirations remain alive only insofar as they are not accompanied by deadlines to be met. The interim government has a little less than 2 months to “create the constitutional basis” for the Libya’s first democratic elections of this century (assumed to take place in December 2021). The complete unpredictability of what is going to happen next has been delaying much-needed investment into Libya, with most investors (even those who happen to have equity) fearing another landslide into all-out mayhem is still on the cards. Against all this, Libya has been trying to struggle its way through another round of plummeting differentials.
The force majeure, initiated mid-April by Libya’s NOC that debilitated operations at the Marsa el-Hariga Terminal (loading Sarir and Mesla grades), took less than 2 weeks to overcome. AGOCO, the NOC’s fully-owned upstream subsidiary, claimed the Central Bank of Libya (CBL) did not transfer its income in due time – reportedly not a single Libyan dinar since September 2020 – compelling the firm to wrap up operations. It took CBL exactly one week to wire 230 million USD to AGOCO’s account and within several days the port of Hariga was loading cargoes again. By early May all fields connected to Marsa el-Hariga were reported to be running at peak capacity. This, of course, does not eliminate the risk of further disputes, especially on highly contentious issues like reporting oil revenues where the underlying causes of discord remains simmering under the surface.
Usually Libya’s NOC issues its official selling prices (OSP) for the upcoming month on the last week of the month preceding the loading. For the second time already this year, it had delayed the OSP issuance into the actual month of loading, taking roughly a week more than it generally should. Following the market ruckus caused by the force majeure, NOC probably wanted to wait for the mayhem to abate. Still, it was induced to decrease prices even further, especially the light sweet ones. El Sharara suffered the most marked depreciation month-on-month, dropping 40 cents to -1.8 USD per barrel against Dated. Smaller flows like Brega, Bu Attifel and Zueitina were hiked by 20 cents per barrel; all the other grades saw insignificant month-on-month changes or were just simply rolled over. Interestingly, Sarir and Mesla, the two grades that have suffered from the force majeure, were also left unchanged.
OILPRICE.COM – Gerald Jansen
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