Libya chaos to deepen if blockade continues: NOC's Sanalla

London — Libya's oil sector is facing a catastrophic situation as production is poised to fall to just 72,000 b/d "very soon" if the blockade led by the self-styled Libyan National Army continues, the chairman of its state oil company said Monday.

Libya was producing more than 1.1 million b/d before January 18, when the LNA suspended oil exports from key terminals and shut in the country's main oil fields.

National Oil Corporation chairman Mustafa Sanalla told reporters at an event in London Libya was currently producing only 262,000 b/d. "Production will reach 72,000 very soon if the blockade continues," he added.

Sanalla said the NOC was trying to reach out to the LNA to negotiate.

The LNA controls most of Libya's oil and gas infrastructure, but still lacks control over the sale of oil and the distribution of revenues, as the relevant institutions are Tripoli-based. This has been one of the main objectives of the LNA in trying to control Tripoli.

The last time the LNA held the key oil terminals hostage was in June 2018 when the shutdown lasted 16 days.

Sanalla urged the international community to find a solution to ensure the rule of law in Libya as the protracted conflict is severely damaging the country and its lucrative oil sector.

"The international community has to understand that if it rewards, or even tolerates, those who break the law in Libya, then it will be complicit in the end of the rule of law in our country," he said. "But acting illegally by blocking Libyan oil production will just lead to the further impoverishment of the Libyan state and erosion of the rule of law."

The LNA, led by General Khalifa Haftar, has been trying to take over Tripoli from the UN-backed Government of National Accord since April. Haftar's big ambition has been to gain access to Libya's oil revenues, which currently go to the country's central bank in Tripoli under the jurisdiction of the GNA.

The LNA, which is backed by Russia and other countries, and the UN-backed GNA, led by Prime Minister Fayez al-Serraj and supported by Turkey, have clashed since April 2019, impacting the oil industry.

OUTPUT TARGETS

Sanalla has urged the international community, the US, UK and France to put pressure on countries supporting the LNA

He admitted the shutdown was blunting NOC's output targets as it "will not receive the requested budget it needs" for its ambitious program to expand oil production.

"Oil revenues are the backbone of the Libyan economy. They pay salaries for 1.3 million Libyans, support education, health and other crucial services," he said.

NOC has set its sights on boosting oil production to 1.50 million b/d by the end of 2020.

Sanalla said the lack of storage capacity at its oil fields and terminals was one of the main reasons production had been shut in since the blockade began.

Storage terminals at the ports of Es Sider and Ras Lanuf suffered extensive damage when these sites were attacked by militants in 2014.

"In Ras Lanuf only 30% of storage is working while at Es Sider only 37% of total storage is working. We have no storage capacity. If we had more storage we would still be producing," he added.

Sanalla said only the output from the offshore fields, which is currently around 60,000 b/d, would be unaffected by the standoff, along with 12,000 b/d produced at the onshore Wafa field.

Libyan crude production averaged 1.06 million b/d in 2019, according to S&P Global Platts estimates, up from 950,000 b/d in 2018 and 810,000 b/d in 2017.

The oil producer has the largest proven reserves of oil in Africa, and its crude is coveted because it is light and sweet.

Libyan crude yields a large amount of middle distillates and gasoline and is extremely popular with refineries in the Mediterranean and Northwest Europe.