Output halted at Libya's 300,000 b/d Sharara Field on orders of warlord's son: sources

Libya's largest oilfield was taken completely offline Aug. 5, after the son of eastern warlord Khalifa Haftar ordered a shutdown in response to a European arrest warrant, according to sources.

Output at the huge Sharara Field, which had been producing roughly 250,000 b/d of oil, initially fell to around 100,000 b/d after protesters entered the operations room Aug. 4, sources told S&P Global Commodity Insights, before ceasing by 1600 GM, two sources confirmed.

Under 10,000 b/d was still flowing to the Awbari power station, a source familiar with the matter said.

Akakus, the joint-venture company that operates the field, had said in a statement that production was stopping "gradually," without giving any details.

Akakus is a JV between Libya's National Oil Corp. and Spain's Repsol, France's TotalEnergies, Austria's OMV and Norway's Equinor.

There has been no declaration of force majeure as yet and none of the partners has commented on the issue, apart from OMV, which acknowledged a reduction in output starting on Aug. 4 and extending into Aug. 5. A spokesperson for Austrian company said they were "unaware of the causes."

'Political blackmail'

Unlike a similar two-week closure by protesters in January over socioeconomic woes, three sources told Commodity Insights the latest shutdown was ordered by Saddam Haftar, whose father dominates the divided country's eastern government in Benghazi.

In a statement on social media on Aug. 5, the western Government of National Unity in Tripoli -- which is recognized by the United Nations -- slammed the closure of the Sharara Field as "new attempts at political blackmail", calling the oil field an "economic artery" for the country.

Bashir al-Sheikh, the leader of the southwestern Fezzan Movement, which has shut oil fields in the past, said his movement had nothing to do with the closure and that Saddam Haftar had issued the order.

The shutdown is understood to relate to an investigation by Spanish authorities into Saddam Haftar, focused on an alleged botched drone deal, which led to an arrest warrant being issued. Sources said the closure was designed to pressure Spanish authorities.

"This move is unlikely to influence the Spanish police, known for their independence even in high-profile cases against the Spanish king himself," a source said. "Unconfirmed reports suggest some Spanish employees were arrested in Sharara yesterday during the closure incident."

The LNA could not be immediately reached for comment. Its leaders have not commented on the shutdown, or the allegations around Saddam Haftar.

Market impact

A closure backed by Haftar's Libyan National Army marks a concerning return to oil output disruptions by political actors in the North African country.

Zhuwei Wang, a senior analyst at Commodity Insights, said it was "bullish" for light sweet crude differentials in the Mediterranean region given that more than 60% of Libyan crudes are exported to the region.

The LNA carried out regular oil and gas blockades until 2022, reducing Libya's output to just 650,000 b/d in June of that year. The blockades largely stopped after the appointment of Farhat Bengdara as chairman of NOC in July 2022.

Since then, production and exports have risen to multi-year highs. In June, Libya pumped 1.16 million b/d of crude, according to the Platts OPEC Survey from Commodity Insights, still well below the 1.6 million b/d it was producing before the NATO-backed ouster of Moammar Qadhafi in 2011, which plunged Libya into chaos.

The country's light sweet crudes are a popular feedstock for refiners in the Mediterranean and Northwest Europe.

Libya controls Africa's largest oil reserves, estimated at 48 billion barrels. NOC plans to increase production to 2 million b/d within the next five years, through 45 greenfield and brownfield projects. It is planning a bid round at the end of 2024, but political unrest and difficulties attracting project financing threaten its production plans.

In recent months, key oil and gas negotiations with IOCs including over the NC-7 and Waha projects, have been caught up in the country's political chaos.