Libya Oil Production Plunges
(Bloomberg) -- Libya’s eastern warlord kept virtually all of the nation’s oil fields shut, in a show of defiance after world leaders failed to persuade him to sign a peace deal ending the OPEC country’s civil war.
Libya’s oil output plunged to the lowest level since August 2011, according to data compiled by Bloomberg. Production stopped at its biggest field, the 300,000-barrel-a-day Sharara, a person familiar with the situation said. Eastern commander Khalifa Haftar began a blockade of several ports last week.
World leaders came up short of a durable cease-fire in the North African nation when they met on Sunday in Berlin. Russia, Turkey and other countries provide military support to opposing groups jockeying for political control and access to energy resources. Central authority in Libya has collapsed amid armed conflict since an uprising in 2011 toppled former leader Moammar Al Qaddafi.
Haftar, who is backed by Russia but walked out of an earlier round of truce talks in Moscow last week, and Libya’s internationally recognized Prime Minister Fayez al-Sarraj will now each put forward five names for a committee to hash out the terms of a more permanent halt to fighting. The United Nations is pushing for a meeting of that group in Geneva within days.
Haftar has led a months-long assault on Tripoli, and fighting continued outside the capital over the weekend.
Global oil prices jumped on Monday as the Libyan disruptions coincided with the shutdown of some output in Iraq, reigniting fears about the market’s vulnerability to geopolitical risk in key supply regions.
Libya’s production began to plummet when Haftar blocked shipments from ports under his control, according to a statement on Saturday from the state-run National Oil Corp. The NOC declared force majeure, which can allow Libya -- home to Africa’s largest-proven oil reserves -- to legally suspend delivery contracts.
Libya won’t be able to pump more than 72,000 barrels per day once its storage tanks are full, according to a spokesman for the NOC, down from more than 1.2 million barrels per day on Saturday. Its remaining production will come from offshore deposits and the Wafa oil field.
Members of the Petroleum Facilities Guard under the command of Haftar’s Libyan National Army shut down the Hamada-Zawiya oil pipeline, forcing the NOC to limit production at the Sharara and El Feel fields, according to an NOC statement. The Hamada station hosts pipelines for Mellitah Oil Co. and Akakus, the operators at El Feel and Sharara respectively, it said.
“This is a policy-related disruption,” said Edward Bell, director of commodity research at Dubai-based bank Emirates NBD PJSC. “There could be a pretty quick turnaround if there’s a political solution.”
Brent crude jumped as much as 1.8% in London to $66 a barrel, but the move was muted compared with the reaction to the attacks on Saudi Arabian oil facilities on Sept. 14. Libya has less production at stake than Saudi Arabia, and its difficulties are more contained than the Saudi crisis, which threatened to escalate into a war in the Persian Gulf, Bell said.
By shutting down oil fields, Haftar is denying a key source of revenue to al-Sarraj’s government. Funds from oil production go to the country’s central bank, and Tripoli uses the money to buy weapons for its defense.
Haftar is proving adept at leveraging his influence as world powers become more entangled in Libya’s conflict. Russian mercenaries have supported his forces, officials have told Bloomberg. Egypt and the United Arab Emirates are also backing Haftar. Turkish soldiers are training forces loyal to Sarraj, and Turkish-backed Syrian rebels have also joined the fray.
Turkey’s forceful intervention added urgency to the desire of Europeans, themselves split over how to solve the conflict, to be seen to at least be trying to do something almost a decade after airstrikes led by France and the U.K. helped rebels topple Qaddafi.
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.