Libya to study the establishment of several oil refineries

LIBYA. Oil production is down by 300,000 barrels per day in Libya, falling to less than 1 million b/d in April 2021 from 1.3 million the month before. According to the NOC (National Oil Corporation), this situation is explained by the debts of companies in the sector which are no longer able to cope with the maintenance of activities. These debts amount to more than $891,000 (€738,000) per day. "We have the capacity to raise the level of daily oil production to two million barrels per day in the near future, but the failure to approve the necessary budgets for the sector has prevented us from achieving this goal," comments Mustafa Sanallah. Chairman of the Board of Directors of the NOC, he adds that "some companies have been forced to stop production due to the lack of spare parts and the necessary operating equipment."

On Wednesday 21 April 2021, during a meeting in Tripoli at the NOC headquarters, he had urged Mohamed Aoun, Libyan Minister of Oil and Gas in the new transitional government. "Help us to get the necessary budgets, because if all capacities are not exploited, the situation will unfortunately deteriorate." His concerns included the impact on the lack of fuel of all kinds on the local market and the failure to rebuild fuel tanks on the road to Tripoli International Airport, most of which were destroyed due to the multiple battles from 2014 to 2020. "This is causing crises in the supply of fuel stations, which is one of the problems we are suffering from today," the NOC chairman stressed.

On Monday 26 April 2021, he was partially heard at an emergency meeting with Refaat Mohammed Al-Abbar, undersecretary of the Ministry of Oil and Gas, at the Arabian Gulf Oil Company headquarters in Benghazi. The new government agreed to allocate 1 billion Libyan dinars (€180m) as part of a deal to end the state of force majeure on oil exports from the eastern oil port of Marsa Al Hariga. The NOC had decreed this on 19 April 2021 when the Central Bank of Libya refused to validate the oil sector budget. In March 2021, the Libyan government granted $1.6bn (€1.33bn) to finance the country's energy activities, a third of which the NOC wants to use to rehabilitate facilities.

"To be honest with you, the relationship between the Ministry of Oil and the National Oil Corporation has always been one of tension, but at this critical juncture in Libya's contemporary history, we have only solidarity and integration in mind," stressed Refaat Mohammed Al-Abbar. "I salute and highly appreciate the efforts of the chairman and the members of the board of directors who have been working under critical and difficult conditions and who have spared no effort to maintain the neutrality of this sector. I will do my best to meet all the challenges, overcome the difficulties and bottlenecks and provide the necessary funding in time (...) No more time should be wasted," he added.
 

In parallel to these stewardship concerns, on Saturday 24 April 2021, Mohamed Hwej, Libyan Minister of Economy and Trade, and Mohamed Aoun revealed that they were studying projects for the construction of refineries in several regions of the country. They would be financed by local and international investments in the form of Public Private Partnerships (PPP). "The government, through its relevant ministries, will take all necessary legislative and executive measures to support these projects, provide facilities and technical support to local and foreign private companies, in cooperation with specialised national companies," says Mohamed Hwej.

The production of fuel and the conversion of natural gas into high quality diesel would better cover domestic demand. And thus avoid Libya, a country with exceptional hydrocarbon resources, having to resort to imports for these refined petroleum products. It would also generate a diversification of income.

The idea is not new. Already in October 2013, the then Prime Minister Ali Zeidan announced the construction of two oil refineries. One was to be built in Tobruk with a capacity of 300,000 barrels per day and the other in Ubari (50,000 b/d) in the Fezzan region (southwest).

Libya currently has four refineries on its soil. The one in Zawiyah (120,000 b/d), near Tripoli, restarted operations at the end of October 2020 according to the NOC. Two others in the east of the country, Tobruk (20,000 b/d) and Sarir (10,000 b/d) resumed operations at the very end of 2020, as indicated by the Arabian Gulf Oil Company, a subsidiary of the NOC.

On the other hand, the largest, Ras Lanouf (Gulf of Sirte) with a capacity of 200,000 b/d, has been closed since 2013. Close to a port and an airport, it was inaugurated in 1984 near the main oil field of the Sirte basin and is supplied by two pipelines. Ras Lanouf produced fuel oil, petroleum gas, naphtha, paraffin, benzene, butadiene and MTBE (methyl tert-butyl ether - liquid ether).

Read also: Libya's Economic Outlook: Oil as a fuel for future investments