Libya’s oil blockade is entering its 7th month and the war-torn country’s oil output is hovering at just 100,000 b/d instead of the pre-crisis 1.2 million b/d.
Without a peaceful solution on the horizon, its expected restart is delayed to fourth-quarter 2020, according to a recent Rystad Energy forecast.
In the most optimistic of scenarios, Libya’s 2020 exit production rate will be 700,000-800,000 b/d. But this estimate itself carries downside risk: once oil production comes back online, it would take Libya another 3-4 months to ramp up production to the 1 million b/d mark.
The damage is not just limited to the short term, according to the analyst, the prolonged blockade has negatively impacted both infrastructure and oil wells, so the eventual production ramp up will demand capex spending to rehabilitate wells and pipelines.
For this purpose, Libya’s National Oil Company (NOC) estimates that between $500 million and $1 billion is needed just to reach the pre-blockade levels of 1.2 million b/d.
Not only oil output has languished, but Libya’s production capacity itself has lost 100,000-150,000 b/d due to the ongoing blockade, according to Rystad Energy estimates.
If the deadlock is not resolved in the coming months, it may drop by an additional 200,000-300,000 b/d, putting the country’s desired oil production level of 1.5 million b/d further out of reach.
“Our latest global liquids balances report still suggests there will be a shift towards a surplus from August and for the ensuing three months, but it is less precarious than previously estimated and developments in Libya have a lot to do with this revision,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.
Rystad Energy is now also reducing supply expectations for OPEC heavy hitters such as Saudi Arabia, the UAE, and Kuwait as it expects slower ramp-up phases given the wobbly demand recovery outlook. Significant upward revisions were applied to Canada, as oil sands projects are exhibiting a resilient production recovery.