Libya shuts two export terminals and an oilfield amid political turmoil

Oilfield closures have so far resulted in significant losses to the country's economy

A pipeline at the Zueitina oil terminal, west of Benghazi, Libya. Reuters
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Opec member Libya has shut down two of the country's biggest export terminals and an oilfield during the continuing political turmoil in the country, resulting in billions of losses to its economy.

The North African country’s state oil company National Oil Corporation (NOC) declared a state of force majeure at the Asidra and Ras Lanuf terminals as well as the El-Feel field, which is also known as the Elephant field, it said in a statement on Thursday.

Force majeure refers to an unforeseen set of circumstances preventing a party from fulfilling a contract.

Shutdowns continue at two other terminals, Brega and Zueitina, with total losses to the country's economy so far reaching 16 billion Libyan dinars ($3.31bn), NOC said.

The NOC on Monday cautioned that it would declare a state of force majeure within 72 hours unless production and shipping were resumed at the oil ports in the Gulf of Sirte.

However, on Friday, it said that the implementation of its obligations as no longer possible.

“It has become impossible to feed the power stations of Zuetina, North Benghazi and Sarir with their needs of natural gas, due to the connection between crude oil production and gas from the fields of the Waha and Mellitah companies leading to a shortage of natural gas supply to the coastal pipeline,” the NOC said.

The latest closures are expected to support oil prices, which are continuing to trade higher on supply concerns as a result of Russia’s military offensive in Ukraine.

Brent, the benchmark for two thirds of the world's oil, was trading 1.52 per cent higher at $110.69 a barrel at 12.50pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 1.4 per cent at $107.24 per barrel.

Libya, an Opec member, produced about 707,000 barrels of oil a day in May, down 186,000 bpd from the previous month, according to Opec’s monthly oil market report based on secondary sources. The country is exempt from the Opec+ production deal because of security concerns.

Libya’s oil production has “decreased and declined sharply" in the current political situation in the county, NOC chairman Mustafa Sanalla said.

"Politicians have false beliefs about the oil issue,” Mr Sanalla said. “Political difference is a right, but the mistake is to use oil, 'the lifeblood of Libyans', as a bargaining chip.”

Libya, which has some of the cheapest, largely sweet, oil in northern Africa, has had much of its production offline during the civil war that erupted between factions after the downfall of former Libyan leader Muammar Qaddafi in 2011.

The country has had two competing governments since March and could again return to instability under rival administrations, the UN said earlier this year.

In April, NOC declared force majeure at the Zueitina oil terminal and Brega oil port as well as Al Sharara oilfield and El Feel oilfield owing to the political tensions.

Last December, four oilfields in Libya, including El Feel, were shut down by gunmen of the Petroleum Facilities Guard, a force employed to guard oil installations, over the issue of pay.

At the time, the NOC said it would take legal steps against the strikers and condemned their actions.

Updated: July 01, 2022, 10:55 AM