Following recent events in Libya, Wood Mackenzie has reviewed its analysis of how long it could take for a recovery of oil and gas production. One of the key issues in this respect is how quickly the National Transitional Council (NTC) can stabilise the security situation across the country.
- It is too early to expect a material recovery in Libya's oil and gas production. "Once a resolution is reached, we believe it will take around 36 months for oil production to recover to the pre-conflict level of 1.6 million barrels a day (b/d). It may be possible, however, for up to 600,000 b/d to be restored within three months assuming a swift end to hostilities, and an early focus by the NTC and international community on stability and infrastructure repair," said Ross Cassidy, North Africa Upstream Research Analyst for Wood Mackenzie.
- Wood Mackenzie's global gas research shows that gas production could take less time to recover. Eight billion cubic meters of gas per year is contracted from Libya to Italy, with Eni as primary off-taker selling to customers in Italy. The Greenstream gas pipeline routes gas from Eni-operated fields in Libya to Italy.
- Massimo Di-Odoardo, European Gas & Power Research Analyst for Wood Mackenzie says, ”The Italian market is presently oversupplied with gas and Eni has had to delay off-take obligations from other suppliers because insufficient market is available. During the Greenstream outage, Eni increased off-take of Russian pipe gas supplies therefore, resumption of Greenstream will add gas to an already oversupplied Italian market with implications for downside price risk and reduced flows of pipe gas from other suppliers, notably Russia. It could take as little as three months to restart Greenstream supply and reach pre-crises production levels, however the time to resume supply will depend on local security and the state of infrastructure.”
- Wood Mackenzie estimates that it will take around 36 months for the country to recover its full production capacity, from whenever the current crisis reaches a resolution. This depends on the scale of damage to oil infrastructure being limited, swift removal of international sanctions and the timely return of international oil companies and foreign workers.
- The Libya state-owned National Oil Company (NOC) and the international industry will have to work in partnership to repair facilities, re-start production and ramp-up to pre-crisis rates. Production recovery is likely to vary by basin. It will take longer in the mature and complex Sirte basin, in eastern Libya, which is the foundation of Libyan production, than in the more modern and less complex fields of the Murzuk and Pelagian Shelf basins, of western Libya.
- Substantial oil volumes could be back in the market by late 2012, if a resolution is achieved by the end of 2011. But the recovery period will extend if production remains shut-in for longer, as infrastructure continues to deteriorate. There is unlikely to be any increase in production or re-start of exports, whilst Libya's oil infrastructure is open to sabotage by either side.
- In the longer-term, the production outlook will be largely dependent on the nature of the outcome to the conflict and its political fallout. Libya has the potential to produce up to 3 million b/d of oil and become a major gas exporter through partnering with the international industry, who will bring finance, skills and technology to existing fields. But, for now, this brighter future remains on hold until military operations are concluded.