July 10, 2017 / 10:42 AM / a month ago

UPDATE 1-Libya's humanitarian situation must be factor in any talk of curbing oil output-NOC

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By Aidan Lewis

TUNIS, July 10 (Reuters) - Libya's political, humanitarian and economic problems must be considered in any discussions about capping the country's rising oil production, the head of the National Oil Corporation (NOC) said on Monday.

Libya is exempt from production cuts decided by the Organization of the Petroleum Exporting Countries. The nation's oil output has more than tripled over the past year as shuttered ports, pipelines and fields have reopened.

Over the past two weeks, output has increased to more than 1 million barrels per day (bpd) for the first time since 2013.

The NOC has previously said it can bring output to 1.2 million bpd this year.

"Libya can play a constructive role in stabilising oil markets by informing OPEC and markets about its plans to restore production," NOC Chairman Mustafa Sanalla said in comments emailed to Reuters.

"Accurate information will remove uncertainty and help the market understand and respond to future supply levels.

"Libya's political, humanitarian and economic situation needs to be taken into account if we are going to talk about production caps."

In light of disrupted production in both countries, OPEC exempted Libya and Nigeria from a campaign that began on Jan. 1 to curb output by 1.2 million bpd aimed at supporting crude prices.

But rising output from the two countries and the United States is undermining the impact OPEC and non-OPEC producers had hoped to make by removing a combined 1.8 million bpd from the market, with Brent prices down since the cuts began.

Despite the recovery in Libya's production, output has been fluctuating due to power generation problems and leaks in pipelines that have corroded after long shutdowns.

Gains are also fragile because of Libya's continuing political divisions, an economic crisis and conflict in parts of the vast North African country.

Armed groups have in the past shut oil facilities to demand money, including for wage payments and local development projects.

The NOC says it has not so far received the necessary budget for sustaining production or expanding it to the 1.6 million bpd that Libya was producing before the 2011 uprising that toppled longtime leader Muammar Gaddafi.

Libya is almost entirely dependent on income from oil sales. Its economy has been contracting rapidly and its foreign reserves are depleted due to sharp drops in oil production and prices over the past four years.

Inflation and a liquidity crisis have contributed to falling living standards across the country.

Editing by Dale Hudson and Jason Neely

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