Forced closure of fields cuts output to lowest level since April
Fall in Libyan oil production takes heat off Opec
Libya’s oil production has dropped by 361,000 barrels a day, equal to 35 per cent of output last month, taking some of the heat off of Opec’s struggle to reduce a global glut.
The North African country’s lost production is worth US$160 million since August 19 as “gangsters” took over pipelines and facilities that forced the shut down of the Sharara field, the nation’s biggest, and the Hamada and El Feel, or Elephant, deposits, according to state-run National Oil Corp.
The drop puts output at about 660,000 barrels a day compared with the four-year high of 1.02 million barrels in July, according to data compiled by Bloomberg. That would be the lowest level since April, the data show.
“Our production was recovering, not quite enough to balance the budget, but enough to give us hope that our financial position could stabilize,” NOC Chairman Mustafa Sanalla said in the statement on Wednesday. “Now we are sliding backward.”
The decline reduces pressure on the Organization of Petroleum Exporting Countries and other major producers to strengthen their output-cuts agreement to counter a supply glut and falling prices. OPEC members Libya and Nigeria are exempt from the production cuts because of internal strife but their recent recovery in output led to speculation they may both be asked to join in the cuts that took effect in January.
Brent crude, the international benchmark, fell 1.1 per cent to $51.44 a barrel on the London-based ICE Futures Europe exchange at 1:02 p.m. in Dubai. Prices dropped 9.5 per cent this year.
Force majeure has been declared on Sharara, El Feel and the Hamada fields, the NOC said. Force majeure is a legal clause protecting a party from liability if it can’t fulfill a contract for reasons beyond its control.
The NOC blamed a militia group it called the Rayayina Patrols Brigade for the disruptions, including reducing Sharara’s output by 283,000 barrels a day. Sharara has a production capacity of 330,000 barrels a day and is run by a joint venture between Libya’s NOC and Repsol SA, Total SA, OMV AG and Statoil ASA.
El Feel has 70,000 barrels a day of output shut, the NOC said. Its capacity is 90,000 barrels a day, and is operated by a joint venture between the NOC and Italy’s Eni SpA.
Libya, which holds Africa’s largest crude reserves, was reviving its oil production in spite of continuing political uncertainty before the recent disruptions. The nation was producing 1.6 million barrels a day before a 2011 revolt set off years of fighting between rival governments and militias.