Libya's eastern government vows total oil shutdown

Libya's eastern government plans to stop all oil production and exports nationwide, it said Aug. 26, amid a row over the fate of the central bank's Gov. Siddiq al-Kabir, with the country's largest oil field already offline.

In a televised statement, the Government of National Stability, which is based in Benghazi and dominated by eastern warlord Khalifa Haftar, said it would declare a "force majeure" on all oil fields, terminals and facilities in the oil crescent, south and southeast, effectively halting production.

Libya produced 1.15 million b/d of crude in July, according to the latest Platts OPEC+ survey by S&P Global Commodity Insights.

The threats follow efforts by the rival Tripoli-based Government of National Unity, which is internationally recognized, to replace the head of the country's central bank last week, which sources said were motivating the eastern administration.

Sources added that any shutdown would take some 24-48 hours to take effect. In a statement, however, Waha Oil, which produces some 100,000 b/d of oil, said it would "gradually reduce production", and called on "the competent authorities to intervene to maintain the continuation of oil production".

Efforts to reach representatives of the state-run National Oil Co. were unsuccessful. Represenatives of Libya's oil minister, Mohamed Aoun, directed Commodity Insights to the GNS statement.

Libya has seen little stability since the fall of Moammer Qadhafi in 2011 and is today run by the two rival administrations in Tripoli and Benghazi. Political rows have frequently spilled over into the oil sector, which accounts for some 93% of government revenue, leading to oil field shutdowns.

The 300,000 b/d Sharara field – Libya's largest – was shut in early August, with force majeure declared by the Libyan National Oil on Aug. 7. The shutdown was initially in retaliation against a European arrest warrant for one of Haftar's sons and since then has become a wider effort to exert pressure Mon GNU Prime M Abdul Hamid al-Dbeiba in Tripoli, sources told Commodity Insights.

Meanwhile, threats of a full-scale shutdown follow efforts by the Tripoli government to oust Kabir, which the institution rejected on Aug. 20 as unlawful. Libya's Central Bank, which unified in 2023, is a depository for the country's oil revenues, which it then dispenses. The Tripoli-based Presidential Council issued a decree Aug. 18 unilaterally installing Mohamed Abdul Salam al-Shukri, a former deputy governor, in Kabir's place.

Once a close ally of Dbeiba, sources said ties between Kabir and the prime minister have soured recently.

And disputes between key political actors including Dbeiba, Kabir, Haftar and NOC Chairman Farhat Bengdara tend to impact oil production in Libya. Previous blockades by Haftar's Libyan National Army reduced output to as low as 600,000 b/d.

On Aug. 22, the United Nations' Libya mission warned that the central bank crisis had prompted militia mobilization in Tripoli, with deputy head Stephanie Koury adding that the political and military situations in Libya had deteriorated rapidly over the past two months.

The threat of a full-scale shutdown will dishearten investors and IOCs, since it follows a period of newfound stability in the Libyan oil sector. The NOC is targeting 2 million b/d of output in the next five years, bringing it closer to pre-civil war levels.

Any shutdown would impact the Mediterranean and Northwest European crude market, whose refiners prize Libya's light, sweet crudes.