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Ras Lanouf Refinery likely to remain idle

byNigel Ash
June 30, 2012
Reading Time: 2 mins read
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Ras Lanouf Refinery likely to remain idle

Ras Lanouf refinery

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Tripoli, 30 June:

Libya’s main oil refinery remains idle thanks to a continuing stand-off between the Libyan and Abu Dhabi parters the . . .[restrict]joint venture Lerco, which is supposed to be running the plant.

The refinery at Ras Lanouf, capable of processing 220,000 b/d of high quality sweet Sarir crude has been at a standstill since the outbreak of the revolution. War damage to a control room and the main cooling tower was repaired early this year. However, dates for restarting operations have repeatedly come and gone. Originally due to recommence production last March, the latest date was in the first week of July. Now however a senior National Oil Corporation official has been quoted by Reuters as saying that this date will also be missed. He added however, that a petrochemical unit, which does not use crude feedstock will restart in a few days.

Ras Lanouf refinery

At the heart of the dispute between the equal partners in the Lerco ( Libyan Emirates Oil Refining Company,) joint venture, the NOC and the Abu Dhabi-based conglomerate, the Al-Ghurair Group, is the fixed-priced feedstock supply agreed with the original deal in 2006. Even an investigation by Qaddafi’s people in 2010 concluded that the 25 year supply deal gave Lerco “unjustified discounts”.

A further problem is that the Ras Lanouf refinery, completed in 1984, is outdated and run-down. It needs substantial investment to upgrade it. This was promised when Abdelaziz Al-Ghurair, the son of the founder of the Abu Dhabi conglomerate, visited Libya last January, as part of a large UAE business delegation. After talks with NOC officials, he announced an investment of $1.2 billion over the coming four years to upgrade the favcility. A source close to the NOC indicated at the time that unless the oil supply price deal could be renegotiated, the state-owned Libyan company would not be interested in putting up its half of the money.

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Oil analysts point out the the NOC has ready takers at market prices for all the Sarir crude it can produce. Even though Libya is having to import most of its refined oil products, this actually works out cheaper than having them provided by Ras Lanouf with its uncompetitive supply agreement.

Until NOC can earn the market price from Lerco, it seems that no feed stock will be delivered and the plant will remain idle. It is equally clear that the Al-Ghurair Group, through its subsidiary TRASTA Energy, which owns its shares in Lerco, is not going to invest to upgrade the refinery, if a renegotiated oil supply contract is too expensive.

With petrol in Libya still costing around 54¢ a gallon or 14¢ a litre, Lerco could not expect to make money out of running Ras Lanouf’s refinery if NOC sells it crude at world prices.
[/restrict]

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