Goldman Sachs: Libya's oil exports could rise by 355,000 b/d

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, June 23 -- Libya’s oil exports could rise by as much as 355,000 b/d from areas held by forces opposed to the rule of the country’s leader Moammar Gadhafi, according to an analyst report.

“The opposition forces could resume about 200,000 b/d of crude exports as some fields and their related export terminals are largely intact,” said the report by Goldman Sachs Group Inc. “A further 155,000 b/d could potentially be exported at a later stage from a second loading port under their control.”

The report said Libya’s oil exports could climb as high as 585,000 b/d if Gadhafi is removed from power and production resumes from western fields held by his government.

The study, led by analyst David Greely, also warned resumption of the country’s full output of 1.6 million b/d will be much more challenging.

“Not only are the export terminals currently under the control of the Gadhafi government, but news reports also suggest that some of the installations have been severely damaged,” the analysts said.

The report follows earlier predictions by the International Energy Agency that Libya’s oil production for the rest of 2011 will be marginal, with the opposition National Transitional Council (NTC), “perhaps able to export some crude in coming months under NATO protection.”

IEA said Libya’s oil production faces a “long haul” to make a full recovery in the wake of the civil war gripping the country and will not return to its full capacity until 2015.

Libya’s oil production has declined to less than 200,000 b/d from the 1.5-1.6 million b/d produced before the outbreak of hostilities in February.

IEA said rehabilitation of Libya’s production capacity will be painfully slow. It said hopes that “a quick end to the unrest would leave the oil sector relatively unscathed have faded now. Indeed, a long, protracted stoppage is looking increasingly likely.”

IEA said recovery will be slow because international oil companies (IOCs) will be hesitant to return until the situation on the ground is completely safe.

IEA noted much of Libya’s oil is waxy, which can cause significant damage to hastily shuttered equipment and wells if they are shut in for long periods of time. Not least, IEA said Libya’s existing contracts with IOCs may need to be renegotiated.

“By next year, the political dynamics should be settled, one way or another, and by 2013 capacity restored to just below precrisis levels, with a full recovery by 2015,” IEA predicted.

US sanctions tightened
Meanwhile, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) tightened US sanctions against businesses connected to the Libyan government while lifting sanctions against Shukri Ghanem, the country’s former oil minister.

“Our sanctions are intended to prevent harm and change behavior,” said OFAC Director Adam Szubin of the lifting of sanctions against Ghanem. “To the extent that sanctioned individuals distance themselves from the Gadhafi regime, these measures can be lifted.”

Earlier this month, Ghanem told reporters in Rome he left his position in Libya due to the “unbearable” violence in the country and the “daily spilling of blood” he witnessed there (OGJ Online, June 2, 2011).

OFAC said it identified nine additional companies as subject to sanctions pursuant to Executive Order 13566 for being owned or controlled by the government of Libya.

Despite the tightening of sanctions against the Libyan regime, the US Department of State this week reiterated its support of oil sales by the opposition TNC.

“The US has strongly encouraged sales of oil by the TNC to help meet the needs of the Libyan people,” a spokesperson said, adding that, “We hope that it will encourage other companies in the United States and elsewhere to continue to purchase oil from the TNC.”

US refiner Tesoro earlier announced it had purchased cargo aboard a tanker chartered by the Swiss oil trading company Vitol.

"We purchased a cargo of Libyan crude that was available at the time," Tesoro company spokesman Mike Marcy told OGJ, adding that the purchase was made in "strict accordance with the relevant White House Executive Order, signed by President Obama (OGJ Online, June 20, 2011).”

The MT Equator, a Liberian-flagged tanker, arrived at the single point mooring in Barbers Point, Hawaii, on June 8 to deliver 1.2 million bbl of Libyan crude sold by the TNC, the group’s first confirmed oil transaction.

Contact Eric Watkins at hippalus@yahoo.com.

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