Libya's oil production is coming back online faster than expected and should reach 700,000 barrels a day by the end of the year, the country's interim Oil Minister Ali Tarhouni said Thursday, confirming estimates also announced by the International Energy Agency.
Libya
's oil
production is coming back online faster than expected and should reach 700,000
barrels a day by the end of the year, the country's interim Oil Minister Ali
Tarhouni said Thursday, confirming estimates also announced by the
International Energy Agency.
Tarhouni says he is optimistic about the rebounding Libyan energy sector as the
country begins to move ahead after the eight-month revolution that ousted
Moammar Gadhafi from office, but he offered a more mixed picture about the
ability of the rest of the economy to recover from the shocks of the war and
the recent political changes.
Libya
's
interim prime minister is conducting stiff negotiations with the rest of the
rebel-run National Transitional Council about the makeup of a new government to
run the country for the expected eight months before elections can be held.
The political limbo has put heavy pressure on
Libya
's
currency, the dinar, which has lost 9% of its value against the U.S. dollar in
the last two weeks. This fluctuation as well as uncertainty about new
post-Gadhafi legal landscape are major reasons cited by
Libya
's
private-sector businessmen for their hesitation to make fresh investment plans
and export orders.
While the oil sector dominates Libya's economy, local and foreign businesses
are hoping that a more open and transparent government will make it easier to
work in the Libyan market, especially the infrastructure sector, health care
and education-areas that the interim authorities have said will be of priority
interest for spending next year.
But Tarhouni cautioned that the pace of
Libya
's
reconstruction will be slower than the private sector is hoping, saying it was
unlikely that the unelected Libyan authorities leading the country now will
award major reconstruction contracts until a more representative government
comes to office. Elections are expected to be held around August next year.
"I don't anticipate that the transitional government will make any big
infrastructure decisions until elections," he said. Tarhouni also said
that
Libya
won't
offer new oil concessions during the eight-month tenure of the incoming
government.
The minister also conceded that the oil and gas sectors will remain the driver
of economic development and growth for the foreseeable future. He said the
bright spot of the economy was the quicker-than-expected return to
pre-revolution oil production levels. Currently,
Libya
is
pumping 570,000 barrels a day, and he expects the rate to return to pre-war
levels by June.
He also said that Libyan natural gas exports from the
port
of
Melita
would
restart "any day now." Gas supplies from that terminal go to the
Italian market.
The International Energy Agency, earlier in the day, confirmed the oil
production estimates announced by Tarhouni at a
Tripoli
press
conference. As recently as September, the IEA was predicting
Libya
would
produce no more than 400,000 barrels a day by the end of this year. That
milestone was passed in October, the IEA said.
Many constraints remain before
Libya
can
restore full pre-war oil production of around 1.5 million barrels a day, the
IEA said. Damage caused by heavy fighting around oil export terminals during
the civil war is likely to constrain output even if oil fields themselves have
not been damaged, it said.
It is unclear whether Tarhouni, a former economics professor at the
University
of
Washington
in
Seattle
, will
retain his position in the new government, which expected to be formed in the
next two weeks. The economic challenges facing that government will be huge,
with some of the most pressing issues being the formation and budget for a new
national army, plus the thorny issue of how to trim government payrolls and
support the private sector.
Libya
's
business community is lobbying the new interim government to loosen up many of
the heavy-handed state policies that crimped corporate work during the Gadhafi
regime, including foreign-currency exchange limits and a law that forced
private enterprises to make Libyan employees shareholders of the business.
"My advice to them is to help support a free market. The free market will
give us enough help to make the economy and our businesses healthy," said
Mohammed Raied, the chairman of
Libya
's
largest dairy producer, Al-Naseem Ice-Cream and Dairy Products. It is unclear
when the transitional government will tackle these legal issues over its
eight-month tenure or not.
Libyan businessmen also say that they are having a hard time re-opening their
lines of credit to kick start imports of goods and services due to the fact
that many countries haven't yet unfrozen Libya's sovereign assets and
central-bank reserves that were placed under sanction soon after the revolt
against Gadhafi began in February. There is a policy dispute among
Libya
's
economic chiefs about the wisdom of unfreezing those funds.
In an interview earlier in the week, the central bank chief, Saddek Elkaber,
urged the international community to move quickly to free up the country's
foreign reserves in order to ease a liquidity crunch in the country.
However, Tarhouni and many officials in the Ministry of Finance are
recommending a more cautious approach, in part to prevent corruption or
mismanagement of the nation's wealth. "We don't yet have the capacity to
monitor these funds," he said.
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