Libyan crude oil production close to the new normal

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Libya was one of the most watched producing countries in 2017, as reviving production meant it was considered one of the countries most likely to undermine industry-wide efforts to tackle bloated inventory levels.

However, when it signed up on 30 November to the accord to extend the OPEC-led production cut deal to the end of 2018, it agreed to cap production at 1M b/d, instantaneously removing itself as a candidate for the 2018 most-watched list. Instead, following further militant action to disrupt production in December, the primary question that will follow Libya in 2018 is whether it can sustain production at its new target level.

Having started the year with output down at less than 0.7M b/d, and fallen as low as 0.55M b/d in April, it was able to rebuild production to 1M b/d by July. However, despite plans to increase production to 1.2M b/d, production growth stalled in H2 2017 with output sustained in the range 0.88 to 0.97M b/d. In December production fell to 0.92M b/d, the lowest since August, primarily as the result of militant activities. On 26 December, a Libyan pipeline was blown up by terrorists. The blast, about 130 km (80 miles) south of the Es Sider terminal, cut output by between 70,000 and 100,000 b/d, according to NOC. In January, Libyan output is expected to recover to close to 1M b/d following repairs to the Es Sider pipeline and the restart of the Agoco operated fields.

The chart above shows the strength of the recovery in Libyan crude oil production as measured by the revival in exports last year. By Q4 2017, exports averaged close to 0.8M b/d, up from 0.45M b/d in Q4 2016 – although still well down on 2012 when exports averaged 1.3M b/d. We estimate that exports were equivalent to 81% of production in 2017.

Using AIS vessel movements data, we are able to build a comprehensive picture of Libyan exports by destination region that is at least three months more up-to-date than a similar profile generated from customs trade data. Our analysis reveals, that while exports to Asia revived quicker than for any other region in the H1 2017, the story was different in the second half of the year with southern Europe taking over as the primary growth market. Our vessel movements analysis also allows us to capture additional trade within the Mediterranean not captured by customs data sources – including to countries of the eastern Mediterranean.

Our AIS vessel movements analysis also allows us to reveal the distribution of tankers servicing the Libyan export market by vessel size. Aframax tankers are the work horses of the Libyan export trade accounting for 50% of total exports last year. Smaller tankers accounted for 29% of volumes during this period, while Suezmaxes (21%) made up the remainder. Despite being the least important tanker sector of the three classifications used here, there are signs that Suezmaxes are becoming more important to this trade as they accounted for 38% of total liftings in December.

Libyan crude oil export terminals are spread along its entire Mediterranean coastline. Around 40% of exports in 2017 were shipped through the western ports of Az Zawiya (28%) and Zuwarah (12%), while 20% went through the eastern port of Marsa el-Hariga. Adjabiya (12%), situated centrally along the coastline, was the next most important export port. A further seven ports provided the remaining 29% of liftings.

The above is an extract from the latest quarterly medium-term outlook for the tanker market from Richardson Lawrie Associates Ltd (RLA), a firm of international maritime economists and business consultants. More information can be found at www.richardsonlawrie.com.

SOURCETanker shipping
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