Insecurity takes its toll on Libyan oil production

02 September 2013

Oil production drops to just 170,000 barrels a day

Libya’s oil sector is in the midst of a major crisis as sit-ins, protests and insecurity hold back crude oil production and prevent exports from leaving the country.

In January 2011, just before the Libyan revolution began, which overthrew former leader Muammar Gaddafi, the country was exporting an average of 1.5 million barrels a day (b/d). Since the end of May, Libya’s oil sector has been hit by numerous strikes and sit-ins by workers demanding improved employment terms, along with localised protests.

This has had a heavy impact on production and exports have slumped by 70 per cent. Figures reported directly to Opec by Libya’s National Oil Corporation (NOC) total 1.242 million b/d in July. However, according to secondary sources, Opec estimates Libya’s July production at 1.062 million b/d, down 10 per cent from 1.186 million b/d in June, and down 27 per cent from production in the last quarter of 2012.

The figures for August are likely to be even lower. On 15 August, Deputy Oil Minister, Omar Shakmak said production had fallen to just 600,000 b/d. Exports are even lower, falling to only 425,000 b/d, less than half its normal levels, losing some $1.6bn in revenues since 25 July. On 1 September, some sources in Libya said it was as low as 175,000 b/d.

The key terminals affected include two of the country’s largest, the Ras Lanuf and El-Sider oil export terminals, which have a combined capacity to export 600,000 b/d. These have faced repeated closure due to strikes by staff, preventing loading and more than 15 crude oil tankers are reported to be waiting outside the two ports to be loaded.

It is also affecting upstream production. With the 19 storage tanks at the El-Sider terminal full to the brim, Waha Oil Company, which normally produces 300,000 b/d has had to stop production. The facility can hold as much as 6.2 million barrels. At Zuietnia, crude from the 100,000 b/d Bu Attifel field has been shut in.

Strikes at Ras Lanuf terminal shut in between 200,000-300,000 b/d of production from fields operated by Arabian Gulf Oil Company (Agoco), Germany’s Wintershall and Harouge Oil Operations. The terminal was able to load its first tanker with refined products from the nearby Ras Lanuf refinery on 16 August, but crude oil shipments will still be a problem.

State-owned National Oil Corporation (NOC) has even been forced on 8 August to announce that it could not guarantee crude oil deliveries for September. Shipments will be “modified”, rather than cancelled, according to NOC chairman, Nuri Berruien.

Libya’s light crude grades such as El-Sider, Sarir and Amna are considered the “staple diets” of refineries in the Mediterranean. This is almost 1 million b/d of light sweet crude oil, which will need to be replaced with heavier medium and sour crude grades, far from a perfect fit for the refineries. There is also the shipping problem. Instead of coming straight across the Mediterranean, Europe’s crude will have to travel a lot further than normal.

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