Libya aims to end fuel subsidies in 3 years: Minister Wednesday, 01 May 2013
*TRIPOLI: Libya will join its neighbours in tackling sensitive fuel market reforms and plans to do away with all subsidies within three years, Oil Minister Abdelbari Al Arusi (pictured) said.* *The IMF estimates over 14 percent of Libya’s budget or about $7bn will be swallowed up by subsidies for food and fuel, which the government says are ineffective because they encourage smuggling and fail to target those most in need of state help.* *“The authorities intend to remove subsidies on all fuel, including both petrol and diesel,” the oil minister said in an interview. “We expect the implementation of this process to take place within the next three years and there will be awareness campaigns for citizens in order to prepare them.”* *Arusi has said petrol prices needed to rise in line with those of its neighbours to stop fuel being smuggled over its borders.* *With a population of around 6 million, Libya’s fuel subsidies are dwarfed by those of larger nations on an absolute basis. Egypt, for example, spends around $15bn or over a fifth of its GDP on fuel subsidies. Fuel subsidies in Libya cost around 8.5 percent of its GDP in 2011 — averaging out to about $487 a head or roughly $3bn, International Energy Agency data shows. * *However, proportionally they are very high with the subsidisation rate of 75 percent, meaning the government covers three quarters of the cost of fuel. And spending is rising rapidly to drive the post-war reconstruction effort — an extra $1.57bn or so will be spent on subsidies this year over last year.* *The recent fall in world oil prices to a nine-month low of less than $100 a barrel could present a barrier to increasing Libya’s Opec quota. “We have the potential to produce about 1.7 million barrels per day (b/d), but there are many obstacles, including the drop in prices on the world market,” Arusi said.* *Current output remains slightly short of pre-war levels at around 1.55m b/d, he added, due to security and maintenance issues that have hampered the full return of Libya’s oil. This level is in line with Libya’s last Opec target set in 2008 at 1.47m b/d.* *Arusi said a shortage of parts needed in oil fields had been felt most acutely at Libya’s Mesla and Sarir oil fields, but he expected these to arrive soon. Security problems in other fields — such as Ghani, where fighting broke out last month — were under control, he said. * *Arusi also said his ministry still planned to launch Libya’s first post-revolution licensing round this year and negotiations about terms on which fields will to offered were underway. “We are now in the process of reviewing previous agreements,” the oil minister said. “We expect to start (the new round) at the beginning of the fourth quarter of this year.”* *Reuters*
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