Egypt Eyes Oil Cooperation With Libya, But Challenges Abound

Egypt and the east Libyan government are discussing ways of expanding cooperation in the field of oil production, with expectations for Egyptian state-owned petroleum companies to start operating in Libya soon.

During a visit to Cairo in late October, Chairman of Libya’s National Oil Corporation, Mustafa Sanallah, said his country needed to enlist the services of Egyptian companies in the reconstruction, maintenance and overhaul of Libyan oil facilities.

“We especially need to benefit from Egyptian expertise in implementing petroleum infrastructure projects,” Sanallah said.

He added at a meeting with Egyptian Petroleum Minister, Tarek al-Mullah, on October 27 that his corporation wanted to benefit from Egyptian expertise in the design and the implementation of oil projects as well as the maintenance of petroleum facilities.

This came as Libya tried to make up for the losses it sustained over the past years because of its unrest and the war raging on in some parts of the country.

The North African oil-rich nation has been suffering political and civil unrest since the downfall of the Muammar Gaddafi regime in 2011, which has taken its toll on its ability to maintain oil production and exports.

This year alone, Libya lost 25 million barrels of oil, according to the corporation.

This translates into billions of dollars in lost revenues, money Libya is badly in need of to reconstruct its cities ravaged by war and conflicts.

Libya now produces around 1.3 million barrels of oil every day. This is by far the highest production level since mid-2013. Nevertheless, this is a lot lower than the pre-2011 production level of 1.6 million barrels every day.

But this is just a fraction of what Libya used to produce five decades ago. In 1969, when Gaddafi came to power, Libya produced 3.1 million barrels of oil every day. In 1970, this daily production rose to 3.35 million barrels.

However, the lack of maintenance for the country’s oilfields and political interference caused the production to significantly drop.

Libya can easily increase its daily production to five million barrels, according to Libyan and Egyptian petroleum specialists.

This is especially true if the required maintenance has been carried out in existing fields and new fields come online, they add.

This is what the expected cooperation between Egypt and the National Oil Corporation can do, given the record of Egyptian companies in overhauling the Egyptian petroleum sector. The same companies also participate in the upgrade of oilfields and facilities in other Arab and African states.

Mulla said Egyptian companies are ready to help Libya return to normal petroleum production levels.

“Egyptian companies will participate in the reconstruction of oilfields affected by the unrest in Libya,” he added during his meeting with Sanallah.

Egyptian participation is of crucial importance for the implementation of the plans of the National Oil Corporation. The corporation has a plan to raise production to 2 million barrels every day by 2022 and 2.2 million barrels a day by 2024.

To make this production raise, the corporation needs to invest approximately $15 billion in the coming five years. This money will be spent on the utilization of technologies that will improve and expand production and existent pipelines.

The presence of these required investments is a daunting mission for the National Oil Corporation, given Libya’s ongoing conflicts, especially the ongoing war between the National Libyan Army and the forces of the internationally-recognized National Accord Government which controls Libyan capital Tripoli.

The fact that some terrorist organizations, including the Islamic State of Iraq and Syria, have taken root and grown in most of Libya also scares international oil companies away from investing in the Libyan oil sector.

The same security challenges are expected to face Egyptian companies when they start operating in Libya.

How Egypt will overcome these challenges as it tries to do business with the neighbouring state will be seen in the coming days.