Sharara Oilfield Shut Down by Protesters, Libya’s Oil Output Takes a Hit

The closure of one of Libya’s largest oilfields has suspended crude oil supplies and affected the country’s oil output.

by Motoni Olodun

Libya’s oil production has been disrupted once again by protesters demanding public services and development projects in the south of the country. The National Oil Corporation (NOC) declared a force majeure on Sunday at its Sharara oilfield, which can produce up to 300,000 barrels per day (bpd), due to the protests.

The Sharara closure has suspended crude oil supplies from the field to Zawiya terminal, NOC said in a statement. The field is one of Libya’s largest and has been a frequent target for local and broader political protests.

The field is located in the Murzuq basin in southeast Libya. It is run by state oil firm NOC via the Acacus company, with Spain’s Repsol, France’s Total, Austria’s OMV, and Norway’s Equinor as foreign partners.

Negotiations are ongoing to resume production as soon as possible, NOC said. The oil and gas ministry warned on Wednesday that the closures of oil facilities “have serious consequences, and it may be difficult to quantify and explain all the damage it may cause.”

The ministry said that the closures “will result in Libyan oil remaining unmarketed” and that “closing and reopening the production requires maintenance operations and the treatment of technical problems, as well as a lot of effort, a long time, and a high cost to be borne by the Libyan state treasury.”

Libya’s oil output has been volatile in the chaotic decade since the 2011 NATO-backed uprising against its former leader Muammar Gaddafi. The country has struggled to maintain stability and security amid competing factions and militias vying for power and resources.

According to the Organization of the Petroleum Exporting Countries (OPEC), Libya produced an average of 1.18 million bpd in November 2023, up from 1.16 million bpd in October. The country’s pre-war production level was around 1.6 million bpd.

Libya is a member of OPEC but is exempt from the group’s production cuts agreement, which aims to balance the global oil market and support prices. OPEC and its allies, known as OPEC+, agreed in December to increase output by 400,000 bpd every month until the end of 2022, unless market conditions require a change.

The Sharara shutdown comes at a time when global oil prices are hovering near seven-year highs, supported by strong demand recovery, tight supplies, and geopolitical tensions. Brent crude, the international benchmark, was trading at $82.64 per barrel on Monday, up 0.8% from Friday’s close.

The closure also adds to the challenges facing Libya’s interim government, which took office in March 2021 with a mandate to lead the country to national elections on December 24, 2021. However, the vote was postponed due to disputes over the legal framework and the eligibility of candidates.

The United Nations, which has been mediating the political process in Libya, has urged the parties to agree on a new date for the elections as soon as possible and to respect the will of the Libyan people for a peaceful and democratic transition.

Despite the difficulties, some analysts remain optimistic that Libya can overcome its political and economic woes and restore its oil sector to its full potential.

“Libya has enormous oil and gas resources that could be a catalyst for development and prosperity for its people,” said Sara Vakhshouri, president of SVB Energy International, a Washington-based consultancy. “With the right governance and management, Libya could become a major oil producer and exporter in the region and the world.”

Source: Reuters

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