Protests hit western Libya oil export facilities

30 October 2013

Oil production and exports in Libya drop after new protests shutdown facilities

Continued protests and militant attacks on Libya’s oil export infrastructure have cut crude oil production to 250,000 barrels a day (b/d), according to some analyst estimates.

The latest incident has caused the 300,000 b/d Sharara oil field to be shut down, while the Mellitah terminal in western Libya has been occupied by activists from the country’s Berber ethnic minority, demanding greater constitutional rights and threatening to halt exports from the facility.

If the terminal is closed, analysts from Barclay’s Capital estimate Libya’s export capacity would fall to just 500,000 barrels a day (b/d). In addition to the terminal’s problems, protests have now engulfed the 330,000 b/d Sharara oil field, the largest producing field in the west of the country. A prolonged shutdown would bring Libya’s total output down to 250,000 b/d.

Oil Minister Abdelbari al-Arusi has said the government is considering the use of force to retake the facilities, but this will be difficult given Tripoli’s inability to deal with the protests, which began at the end of May.

According to the Oil Minsitry, production in early October had been stablised at about 700,000 b/d, up from 350,000 b/d in September. Before the strikes and protests, Libya’s output stood at approximately 1.5 million b/d.

Ouptut from fields in the east of Libya is still restricted, as the key export terminals remain shut. The most notable of these are the 450,000 b/d El-Sider, 250,000 b/d Ras Lanuf and 150,000 b/d Zueitina terminals. The problem in eastern Libya, however, is not just over increased salaries, or greater rights for minorities as in Mellitah. Segments of the eastern region are pushing for greater control over oil production and calling for a federal government. These long-standing issues mean even if production is brought back online, without a political solution, the situation is likely to flare up again.

Where fields have been producing, their output has been prioritised for domestic refineries, which have been starved of feedstock. This is likely to continue for some time as facilities come back online. This has been bad news for the crude markets, coinciding with other large outages from Iraq and Nigeria in September.

Libya’s light crude oil is considered crucial for refineries in the Mediterranean, which have been forced onto the spot market due to the uncertainty surrounding supplies.

“The effect on Mediterranean refineries is most pronounced, given that they are already facing poor margins and weak regional demand prospects,” Barclays Capital said in a research note on 29 October

“Refineries are in a tentative state in [finding] alternative sources, as they are unsure whether they will have commitments from their contractual obligations with Libya if volumes return,” the note continues.

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