The pace of Libya's reentry into world oil markets has exceeded our prior expectations and those of many other outside observers. While opinions vary significantly on the eventual trajectory for Libyan oil production, nearly all forecasts have steadily shifted upwards as the country's oil sector and related institutions continue to progress.
Libya's National Oil Corporation (NOC) claims to be on track to meet its goal of returning to pre-war crude oil production levels of 1.65 million barrels per day (bbl/d) by the end of 2012. Most analysts now expect production to reach anywhere between 1.0 and 1.6 million bbl/d during that timeframe. Based in part on developments in recent weeks (Table 1), the U.S. Energy Information Administration (EIA) expects that Libyan output may ramp up to 1 million bbl/d by the beginning of the second quarter of 2012. Thereafter, EIA expects crude oil production to plateau somewhat, increasing only gradually to about 1.2 million bbl/d by the end of 2012, along an uneven and non-linear path.
Libyan oil exports suffered a near-total disruption earlier this year during months of intense fighting between Colonel Muammar Gaddafi's regime and the opposition, as sporadic production fell to minimal levels and was mostly consumed domestically. As the Transitional National Council (TNC) and affiliated rebel militias consolidated control over most of the country in recent months, however, initial volumes from the fields operated by international oil companies (IOCs) through joint ventures with NOC began to supplement increased production from NOC subsidiaries, including the Arabian Gulf Oil Company (AGOCO).
Libya's complex array of concession areas, production sharing arrangements, crude grades, and export infrastructure complicates efforts to track production claims. But field-level reporting suggests that crude oil production rose to at least 600,000 bbl/d by the end of November, over one third of pre-crisis levels, from about 350,000 bbl/d in October. According to the tanker shipments tracked in the Lloyd's List Intelligence APEX database, Libyan crude oil exports averaged 160,000 bbl/d in October and over 400,000 bbl/d in November.
An earlier edition of This Week in Petroleum outlined some of the key infrastructural, political, and security factors affecting the outlook for Libyan oil production. In terms of infrastructure, it appears that most upstream assets fared better during the fighting than initial reports had suggested. A comprehensive assessment of the country's infrastructure, however, awaits more thorough inspections of the various producing regions within Libya. Moreover, returning a field to full capacity may be far more challenging than simply restarting it, particularly in the case of older infrastructure and more depleted fields that were hastily shut down. Downstream, most refineries are fully operational; the largest, Ras Lanuf, is reportedly prepared to restart. The most significant conflict-related damage was to crude export terminals, especially Es Sider (As Sidrah), which could take up to a year to be restored fully.