New market study, "Libya Oil & Gas Report Q2 2014", has been published

From: Fast Market Research, Inc.
Published: Fri May 02 2014

Production in Libya will continue to be hit by domestic political and social instability in the short term and we note that unrest in the wider North African region will rock the oil and gas industry as well. Oil and gas production forecasts have been downwardly revised as a result of these developments, as political tensions are not likely to be resolved in early 2014. The deficit of greenfield investment, owing to political unrest, will spill over into the long term in the form of slower production growth, as Libya underperforms its raw hydrocarbon potential.

The key trends and developments in Libya's oil and gas sector are:

* Continued instability in Libya has affected production in 2013 and we expect output in 2014 to disappoint as well. We expect production to fall further in 2014 to 502,380 barrels per day (b/d). As we do not see prospects for improvement in the short term, this has had a knock-on effect on our forecast for 2015 as we expect the current state of unrest to continue, with output underperforming at 940,470b/d. However, according to our Country Risk team the political impasse could stabilise by late 2015, which could then see a rebound of oil production. Oil output could hit 1.28mn b/d - about 420,000b/d shy of the oil ministry's target of 1.7mn b/d by 2017 - in 2018 and 1.49mn b/d by 2023, short of the 2.2mn b/d that NOC had aimed for.
* We estimate a decline in gas production in 2013 to about 7.8bcm as a result of output disruptions that have rocked Libya. Production is likely to underperform in 2014 and only rebound in 2015, assuming an easing in political tensions. This could see gas output pick up to reach 15.5bcm in 2018 and 19.8bcm by 2023. However, we highlight that greater-than-expected security risks could deter greenfield investment into this underweight sector of Libya's hydrocarbon industry.
* There are both upside and downside risks to these forecasts. An improvement to Libya's political situation could see a gush of investment, particularly into greenfield projects, with high oil prices supporting such decisions - we expect the reference basket price of OPEC crude to stay above US$90 per barrel (bbl) over our forecast period. However, a deterioration of political tensions could severely threaten production growth.
* International investment is also a big unknown. Libya's vast oil and gas reserves stood at an estimated at 48.0bn barrels (bbl) and 1.9trn cubic metres (tcm) respectively at the start of 2013. However, political risks, the introduction of new production sharing contracts and a revised hydrocarbon law are all likely to affect the country's business environment and consequently business sentiments.

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