Libya oil production slows as world looks elsewhere for fuel

Ongoing protests have forced the closure of two export terminals and an entire oil field in Libya, causing a drop in the country's oil production. Gains in production elsewhere may mean a long road ahead for oil in Libya.

By , Guest blogger

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    A security officer walks past a gas pipeline after an explosion, 11 miles south of the city of Ajdabiyah, Libya in April. With oil demand and production centers shifting away from the Middle East and North Africa, Libya may find itself in a long-term state of disrepair.
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Oil production from OPEC-member Libya, a leading African oil producer, hasn't recovered from civil war. The state oil company said it wasn't able to return to its pre-war glory because of ongoing protests that forced the closure of two export terminals and an entire oil field. OPEC said in its monthly report for June that oil demand should continue to grow this year as global economies slowly start to recover. China is leading in terms of oil demand growth and it's North America, not the Middle East, that's leading the way in oil production. With demand and production centers shifting away from the Middle East and North Africa, Libya may find itself in a long-term state of disrepair.

The Organization of Petroleum Exporting Countries said it expected world oil demand would increase by 800,000 barrels per day in 2013. China is expected to lead in terms of oil demand with 400,000 bpd, the cartel said. On the supply side, OPEC projected growth from outside the cartel at 1 million bpd for 2013, a figure supported by "strong anticipated growth" from the United States. (Related article: Libya Wants to Sell Oil. Is Anyone Listening?)

The U.S. Energy Department's short-term market report paints a similar picture, with U.S. tight oil and Canadian oil sands expected to drive production growth for non-OPEC members. The United States is expected to produce 8.1 million bpd by 2014, a 24 percent increase from 2012 levels. That means the world's leading economy is importing less foreign oil from places like Libya.  In February, the United States didn't import any oil at all from Libya. 

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OPEC said it was expecting a comeback from Libya, however. That's backed up by 1.2 million barrels of Libyan crude oil imported by the United States in March. In general, OPEC said Libya was producing about 1.4 million bpd, a bit shy of its 1.6 million bpd produced before civil war in 2011. The Libyan National Oil Corp., which announced it was moving its headquarters to Benghazi, of all places, said production declined to less than 1 million bpd, however, because of "some individuals" who managed to shut down export terminals and an oilfield during recent protests. (Related article: TUNISIA: Salafi Extremism Will Affect Oil Confidence)

NATO forces intervened during the early stages of Libya's civil war in 2011. When Moammar Gadhafi died after falling into rebel hands, President Obama said the "dark shadow of tyranny has been lifted" like a veil from the Libyan people. Without Gadhafi, he said, the Libyan people can chart a path to an inclusive, tolerant and democratic nation. More than two years on, the new Libyan government finds itself vulnerable to the whims of the innumerable armed militias roaming free in the post-Gadhafi era. Since the NATO invasion, meanwhile, U.S. oil production has increased more than 20 percent to 6.5 million bpd.

U.S. legislators are busy debating how best to tap into even more reserves offshore. That suggests even less future imports from overseas, meaning at least one of Libya's oil consumers is pulling away from the region. The U.S. military, meanwhile, continues to show a greater interest in the Asia-Pacific. One of the last major U.S. military experiments ended in 2011 when combat forces pulled out of Iraq, one of the top OPEC producers. If Iraq serves as the benchmark for post-conflict recovery, Libya has a long road ahead.

Original Source: http://oilprice.com/Geopolitics/Africa/Libyan-Oil-Production-Suffers-as-World-Attention-Shifts.html

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