Libya’s oil blockade is expected to persist further, shrinking upcoming global production glut by 65%
Libya’s oil blockade is now entering its seventh month and the war-torn country’s oil output is hovering at just 100,000 barrels per day (bpd) instead of the pre-crisis 1.2 million bpd. Without a peaceful solution on the horizon, Rystad Energy is further pushing back its expected restart to the fourth quarter of 2020, a change that will help reduce the expected global production surplus to just 58.6 million barrels, or to about one-third of our previous forecast.
In the most optimistic of scenarios, Libya’s 2020 exit production rate will be between 700,000 and 800,000 bpd. But this estimate itself carries downside risk: once oil production comes back on line, it would take Libya another three to four months to ramp up production to hit the 1 million bpd mark.
The damage is not just limited to the short term. The prolonged blockade has negatively impacted both infrastructure and oil wells, so the eventual ramping-up of production will demand capex spending on rehabilitating 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 bpd. It is not only oil output that has languished.
Libya’s production capacity itself has lost between 100,000 bpd and 150,000 bpd due to the ongoing blockade, according to our estimates. If this deadlock is not resolved in the next few months, we might see it dropping by an additional 200,000 to 300,000 bpd. This puts the country’s desired oil production level of 1.5 million bpd even further out of reach.