June 19, 2017 / 10:44 AM / in 5 months

UPDATE 2-Libyan oil output nears target with deal to settle contract row

(Adds tanks repaired at Ras Lanuf, NYT op-ed, Hariga working normally)

By Ahmad Ghaddar

LONDON, June 19 (Reuters) - Libya’s oil output has risen by more than 50,000 barrels per day (bpd) to 885,000 bpd after the state oil firm agreed to restart production which had been stopped by a dispute with Germany’s Wintershall, a Libyan oil source told Reuters on Monday.

The National Oil Corp (NOC) and Wintershall reached an interim deal last week on an upstream contract dispute that had stopped production of some 160,000 bpd.

OPEC member Libya’s production is expected to recover to 900,000 bpd in the short term, the NOC said last week and Libya is targeting output of 1 million bpd by the end of July.

Wintershall shut down production at its NC 96 and NC 97 concessions in the Sirte basin, around 1,000 km (625 miles) southeast of the Libyan capital Tripoli, during the dispute which began earlier this year.

It also led to a shutdown at oilfields including Eni’s Abu Attifel, which shares processing facilities with Wintershall.

“Through Wintershall facilities we can pump the production of other producers like Eni and other operators,” the source, who declined to be name, said.

Abu Attifel, which resumed production on June 14, can pump 50,000-60,000 bpd, NOC says.

In a further boost to Libya’s production prospects, an official from Harouge Oil Operations, which operates the port of Ras Lanuf, said three storage tanks damaged by fighting had been repaired and were ready for use, bringing the total number of functioning tanks to seven.

He did not say by how much the extra capacity could increase exports.

EXEMPTION

Libya is excluded from a renewed output reduction pact struck by OPEC and non-OPEC producers which runs until the end of March 2018. But rising Libyan supplies threaten to overwhelm OPEC’s efforts to rebalance the oil market.

Saudi Energy Minister Khalid al-Falih signalled on Monday in a newspaper interview that Libya was unlikely to be asked to join the cut agreement.

“It is inappropriate to pressure Libya to slow the recovery in its production,” he told London-based Asharq al-Awsat.

He added that Libya and Nigeria, which is also exempt from the cuts, “shouldn’t be considered a threat to the initiative”.

OPEC’s May oil production was up by 336,000 bpd at 32.14 million bpd, led by a rebound in output from the two countries.

Libya was producing more than 1.6 million bpd before the 2011 uprising. Its partial revival in output remains vulnerable to political turmoil, protests and financial constraints.

This month, factions in eastern Libya threatened to cut off exports handled by Glencore from Hariga because of the trading firm’s links with Qatar, although an official at the port said it was working normally.

In an opinion piece in Monday’s New York Times, NOC Chairman Mustafa Sanalla denied allegations that the NOC had worked in Qatar’s favour, and appealed for the body to be ring-fenced from local and international rivalries.

“We at the NOC intend to remain neutral until there is a single legitimate government we can submit to,” he wrote. (Additional reporting by Ayman al-Warfalli in Benghazi; Writing by Ahmed Ghaddar and Aidan Lewis; Editing by Jason Neely and Alexander Smith)

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