As Shell joins the ranks of foreign firms reassessing their presence in Libya amid political and security instability, the country’s downstream ability to attract needed investment and modernization financing has become increasingly questionable. Although general production levels are on schedule to meet pre-conflict levels this summer, Libya’s ability to move beyond that amount and make better use of the continent’s largest proven reserve of crude is far less certain in the eyes of potential production partners.
While both sides of last year’s conflict expressed their intent in protecting the country’s valuable production and refining infrastructure, many facilities were damaged during the violence that led to the collapse of the Gadaffi government. Far more remains outdated and unable to meet growing needs.
At the center of the debate is the country’s continued delay in re-opening the 220,000bpd Ras Lanuf refinery. While operations at the country’s second largest Zawiya Oil Refinery have reportedly returned to 100 percent, concern about stability and disputes with local authorities have kept the needed Ras Lanuf from operating at full capacity.
These concerns stem from growing public protest against new and existing contracts and uncertainty about the country’s political well-being. The latter of these issues has been further complicated by the recent news that national elections would be postponed from this month to next. Meanwhile, according to a Dow Jones report, the country’s energy sector has been slowed and in some cases stopped completely, by an ongoing review process and increasingly anxious opposition to agreements with US and European firms.
The resulting landscape has left many foreign partners, who would provide needed funding for infrastructure development and downstream expansion, wary about returning or entering the Libyan marketplace. In March, State Oil Co. of Azerbaijan, or Socar, denied reports that they would enter into agreements with Libya to expand their refinery and petrol station presence in the country, citing ongoing instability as the reason.
Originally Posted in Newsbase’s Downstream Monitor, All Rights Reserved