Libya’s rising output a challenge for OPEC, Russia

Bloomberg

Libya’s rebounding oil output is undermining the supply curbs masterminded by Saudi Arabia and Russia. But any pleas for the OPEC member to exercise restraint will probably be resisted by the technocrat overseeing the North African nation’s turnaround.
Production has climbed to a four-year high of 1.1 million barrels a day, with Libya adding output since April that’s equivalent to more than a quarter of the cuts agreed by OPEC and its allies.
The restoration of Libyan oil supply has put the spotlight on National Oil Corp. Chairman Mustafa Sanalla, whose influence has waxed in a country divided between a weak United Nations-backed government in the west and a military strongman in the east. When OPEC meets with Russia in St. Petersburg this week, the 56-year-old petrochemical engineer will speak for a nation that’s causing as much angst as US shale drillers.
“Sanalla has become the central figure in the oil and gas sector,” Geoff Porter, founder of the North Africa Risk Consulting, said in an interview. “His job is to produce as much oil as possible while he can and I think that’s what he is going to continue to try to do.”
When OPEC, Russia and other producers agreed last December to cut production to boost prices, Libya easily secured an exemption. The nation with Africa’s biggest
oil reserves was pumping about half a million barrels a day of
crude, less than a third of its pre-conflict capacity.
Libya was off the radar, skipping OPEC meetings and not providing the group with monthly production data. Now, with output surpassing the symbolic 1 million barrels-a-day mark, OPEC members want Libya at the table in St. Petersburg. While it’s unclear if Libya will send a representative to the ministers’ meeting on July 24, Sanalla will attend a technical meeting two days earlier.
Libya will share with the committee “the factors enabling and constraining” its recovery in output, Sanalla said in a statement.
As for joining the supply curbs and while Ecuador deals a blow to OPEC unity, Sanalla has previously hinted that Libya’s challenges won’t make that easy.
“Libya’s political, humanitarian and economic situation needs to be taken into account if we are going to talk about production caps,” Sanalla said in a July 11 statement, following suggestions from other OPEC members that the country could be asked to curb output.
Sanalla’s growing stature in
a divided country — General Khalifa Haftar controls eastern Libya
and vies for power with the UN-backed Tripoli-based government of Prime Minister Fayez al-Serraj — was on display last month in an opinion piece in the New York Times, where he urged the NOC
to remain aloof from the nation’s
internal politics.