Libya oil shutdown endures despite isolated resumptions: sources

As much as 230,000 b/d of crude production has been restored in Libya to alleviate a fuel shortage, but sources said the increase did not indicate that a week-long oil shutdown was easing.

On Aug. 26, Libya’s eastern political faction began closing oilfields and terminals across the country in response to efforts by the western government in Tripoli to replace central bank governor Siddiq al-Kabir.

By Aug. 30, the National Oil Company said 63% of Libyan production had been lost, due to the shutdown. Two days earlier it had estimated output at 591,000 b/d, down from 1.2 million b/d in late July.

The monthly Platts OPEC Survey from S&P Global Commodity Insights estimated Libyan output at 1.15 million b/d in July.

However, on Sept. 2, sources confirmed local reports that the Mesla, Nafoura and Sarir fields, operated by Arabian Gulf Oil Company, an NOC subsidiary, had resumed operations, providing a production boost of up to 230,000 b/d for the North African country.

Total output was unclear, but estimated at between 700,000-800,000 b/d.

“Some mistook it for being a possible partial lifting of the blockade to be followed by other fields and terminals but it is in fact just the three ... fields that have been reactivated to supply fuel amid nationwide shortages,” said a source familiar with the matter.

The resumption of certain eastern fields -- under the control of warlord Khalifa Haftar -- will not boost crude exports to Europe, which are set to slow to a trickle after ports and facilities were ordered to close.

Refiners in the Mediterranean and Northwest Europe have prized Libyan light sweets over the past year, with exports reaching multi-year highs in April. As a result, rival Med-bound crudes have strengthened since the shutdown.

Even before the full-scale shutdown Libya was facing a fuel supply crunch, with queues at pumping stations running several miles long, according to eyewitnesses. The shortages were exacerbated by poor weather, which prevented refined product tankers from docking in Libya ports, and force majeure declared by NOC on Aug. 7 on the 300,000 b/d Sharara field, shut by one of Haftar’s sons according to sources.

Fuel shortages have led to regular protests in key oil producing regions since the fall of Moammar Qadhafi in 2011, which plunged the country into chaos and spurred untold volatility in the oil sector.

Although a 2020 truce ended a civil war in the country, Libya is today governed by separate administrations in the west and east. Meanwhile, relationships between key actors including Haftar, the NOC chair, Kabir and Abdul Hamid al-Dbeiba, head of the internationally recognized government in Tripoli, have a direct impact on oil production.

It was Dbeiba’s government that attempted to oust Kabir in early August, prompting the shutdown by the eastern government. The central bank is unified and takes receipt of Libya’s lifeblood oil revenues.

Sources said the issue is far from resolved, despite the three fields reopening, with Kabir having fled the country in fear of armed militia groups in Tripoli, according to the Financial Times.

“As long as the central bank leadership dispute continues and Kabir remains out of the picture, we likely won’t see the east budge anytime soon,” said a source.