Libya Crude Oil Output Falls After Field, Port Closings

Libya’s crude output dropped 13 percent as clashes among rival armed groups over the last 11 days led to the closing of some of the OPEC nation’s biggest oil export terminals, forcing a number of fields to halt production.

Output is down to 602,900 barrels a day, Jadalla Alaokali, a board member at National Oil Corp., said by phone Monday. Production was about 700,000 barrels a day before fighting broke out on March 3. The offshore Al Jurf field run by Mabruk Oil Operations is under maintenance, contributing to the reduced supplies, Alaokali said.

Es Sider, the country’s biggest oil port, and Ras Lanuf, its third-largest, remain closed, according to a person familiar with the matter, who asked not to be identified because the person doesn’t have permission to speak to media. Crude production halted at Waha Oil Co., which pumps crude to Es Sider. Waha is a joint venture between the state oil company National Oil Corp., Hess Corp., Marathon Oil Corp. and ConocoPhillips.

The clashes dealt a blow to recent gains in the North African nation’s oil output. Exports had resumed from Es Sider and other facilities that were previously shut amid fighting in the country, which has Africa’s largest crude reserves. Output in February was about 700,000 barrels a day, almost double the level of the previous year, data compiled by Bloomberg show.

The Petroleum Facilities Guard, a United Nations-backed force, last week said they took control of oil installations at Es Sider and Ras Lanuf, following their capture by a militia group called the Benghazi Defense Brigades earlier this month. The ports had previously been controlled by eastern-based military commander Khalifa Haftar.
Force Majeure

The NOC will have to declare force majeure at ports if the fighting continues, Alaokali said. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control. The status was imposed on the two ports in December 2014 when armed groups attacked the area, damaging storage tanks and infrastructure. It was lifted about two years later.

The ports have escaped damage so far, “but the risk is relatively high,” Alaokali said.

Air strikes at the two ports have continued for the last two nights and resulted in some damage to parts of the maintenance building at Es Sider and parts of the petrochemicals factory at Ras Lanuf, Idries Bu Khamada, head of the Petroleum Facilities Guard, said by phone Monday. The damage to Es Sider shouldn’t prevent exports, he said.
Port Loadings

Waha Oil has a capacity of more than 300,000 barrels a day, according to the NOC website. Its production dropped by half to 40,000 barrels a day after the closing of Es Sider port, before it came to a complete halt at the end of last week. The country has also been rescheduling crude loadings at Es Sider and Ras Lanuf and transferring them to other ports like Zueitina and Brega.

The Al Jurf field is 50 percent owned by the NOC, 37.5 percent by Total SA and 12.5 percent by Wintershall AG, according to the Mabruk website.

Libya is struggling to revive oil production amid political turmoil and conflict among forces competing to control its energy assets. The country is still pumping far less than the 1.6 million barrels a day it produced before a 2011 uprising that ushered in years of instability.

The Organization of Petroleum Exporting Countries exempted Libya from its agreement in November to cut output to end a global oversupply.
Source: Bloomberg