By Pieter Scribante, Economist and Political Analyst
On July 31, the National Oil Corporation (NOC) declared force majeure on oil production at El-Sharara – Libya’s largest oil field – and on crude oil loadings at the Al-Zawiya port.
This was prompted by an illegal pipeline valve closure which hinders oil supply from El-Sharara to the port. Attempts to reopen the valve and restart production are being prevented by “a local armed group”, according to a statement by the NOC.
This is the second time in less than ten days that the NOC has halted oil production at El-Sharara, with the previous force majeure being lifted, after only a few days, on July 23. The production loss equates to an estimated 290,000 bpd or roughly $19m a day.
Oil production has remained remarkably stable over the second quarter despite events in Tripoli and was recorded at a six year high at an average of 1,155,000 bpd in 2019 Q2 (still well off the pre-2011 revolution average of around 1.6 mbpd).
The second quarter’s production signifies a 19.7% q-o-q increase on the 965,000 bpd recorded in 2019 Q1 when El-Sharara was closed for three months after being occupied by protesters.
Oil production is currently below 950,000 bpd, the lowest level since February, according to the NOC.
NOC Chairman Mustafa Sanalla stated that “This latest incident only serves to highlight the fragility of our security environment and the total disregard for the impact of such acts on the lives of everyday Libyans. The loss of production at Libya’s largest oilfield severely disrupts power supply to the grid and the continued funding of basic services. This is most acutely felt by communities in the South.”
It is unclear when the force majeure will be lifted, but Akakus Oil Operations, a subsidiary of the NOC, is attempting to reopen so that operations can resume.
This illegal valve closure raises concerns that the ‘unnamed militias’ are either trying to disrupt oil distribution, thereby reducing the revenue stream of the Tripoli-based NOC and Government of National Accord (GNA), or they are trying to bypass them altogether.
There were reports of illegal oil sales by the NOC based in the country’s east in May – which would contravene the 2016 UN Security Council resolution that designated the Tripoli-based institutions as the sole entities with authority over the sale of Libyan crude oil – but no further developments or details have emerged since.
Whether these unnamed militias are associated with the Libyan National Army (LNA) is unclear; what is clear is that the country’s oil production remains at risk.
Different armed groups are increasingly likely to take advantage of the security vacuum left throughout the country, with the LNA spread thin as it tries to take Tripoli.
The group, under the leadership of Field Marshal Khalifa Haftar, continues its assault on the UN-recognised GNA in the capital.
The fighting has claimed the lives of almost 1,100 people since fighting began in April, according to the World Health Organisation.