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Return of Libyan oil to begin; tanker set to load from Marsa el-Hariga

London — The return of Libya's oil to the market is partially underway as a tanker has reached the eastern port of Marsa el-Hariga to load 1 million barrels of oil from storage tanks, shipping and Libya-based sources said Sept. 23.

Sources said this tanker was chartered by Unipec, which has regularly lifted Libya's Sarir/Mesla crude. Unipec was unavailable for comment.

Mohamed Shatwan, chairman of National Oil Corp subsidiary Arabian Gulf Oil Co. which operates the port, confirmed in a statement that this tanker is loading at the terminal.

Shatwan also said the company had taken the necessary measures and made arrangements to resume production at its fields.

AGOCO operates the Beyda, Hamada, Mesla, Sarir, Nafoora and Majid fields, which have the capacity to produce around 300,000 b/d.

These fields are likely to the first to ramp up as the North African oil producer restarts its beleaguered oil sector.

A second tanker, the Marlin Shikoku, also chartered by Unipec, is also due to reach Marsa el-Hariga in a couple of days to load a 1-million-barrel crude cargo, according to shipping data and traders.

These loadings come after the UN-backed Government of National Accord and the self-styled Libyan National Army agreed to a deal on Sept. 19 to reopen key oil ports and restart oil production.

On Jan. 18, eastern tribes supported by the LNA halted exports from five oil terminals, sharply reducing the country's crude production, which hit its lowest since the 2011 civil war.

Libyan oil output has slumped to 70,000-120,000 b/d in the past few months compared with around 1.10 million b/d before the blockade.

During the blockade, Libya was still exporting oil from offshore fields -- Al Jurf and Bouri -- and occasional condensate exports out of the Mellitah terminal in the west but its main oil terminals were all closed.

Partial restart

NOC said on Sept. 21 it expected its oil production to rise to 260,000 b/d from next week.

NOC also said it would not allow exports from ports where there is an armed presence, which means that key terminals such as the 250,000 b/d Es Sider and 220,000 b/d Ras Lanuf are likely to remain offline for now.

The bulk of the exports expected in the next week come from barrels in storage, and the continued increase in Libyan production will hinge on the restart of the 300,000 b/d Sharara field, which has been beset by security and technical issues.

But many analysts do not expect a full return of more than 1 million b/d of Libya's light sweet crude to the market, due to the shakiness of the output deal and the presence of armed groups at some of the key oil infrastructure.

"Should the implementation of the agreement prove successful -- a big if -- production could climb to 500,000 b/d within a month," director of geopolitics and energy at Medley Global Advisors, Mohammad Darwazah, said.

"Any further incremental additions will hinge on how quickly Sharara can restart and ramp up and whether the NOC agrees to reopen Es Sider and Ras Lanuf, which currently remain closed due to the presence of Russian mercenaries," he added.

Libya's largest oil field, the 300,000 b/d Sharara, was back online Sept. 20, but production will be slow to start due to recent technical problems, according to Libya-based sources.

Flows on the pipeline from Sharara to the Zawiya export terminal also resumed this week, with initial flows estimated to be 50,000 b/d, they said.

Deal prospects

The output restart deal was signed by GNA Deputy Prime Minister Ahmed Maiteeq, but GNA Prime Minister Fayez al-Sarraj has not yet publicly backed the deal.

Sources have also said the deal is subject to certain conditions, and given the fractious relations between the two sides, the deal is expected to run into difficulty.

The longevity of the deal would be conditional on the revenue sharing scheme "functioning properly," according to Verisk Maplecroft Middle East and North Africa analyst Hamish Kinnear.

"The oil blockade could easily snap back into place within one or two months if the LNA believes that it has not received its full share of revenues," he added.

The deal is based on the formation of a joint technical committee, which will oversee oil revenues and ensure the fair distribution of resources along with other key responsibilities.

The distribution of the oil revenues was one of the main reasons for the LNA-led blockade.

"The sustainability of these volumes will hinge on both parties' ability to meet their obligations, including a set of ambitious demands made by Eastern authorities," Darwazah added.

Libya holds Africa's largest proven reserves of oil, and its main light sweet Es Sider and Sharara export crudes yield a large proportion of gasoline and middle distillates, making them popular with refineries in the Mediterranean and Northwest Europe.

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