Libyan oil production has been hampered by conflicts stemming from civil war that erupted in the wake of Arab Spring movements
JUN 27, 2018 (BE2C2): Libya’s National Oil Corp. said it rejected a move by the Libyan National Army to move on exports from the Gulf of Sirte. The move followed militant raids on oil storage depots in the east of the country earlier this month that sidelined production from the member of the Organization of Petroleum Exporting Countries.
“The Libyan army lacks authority to take control over oil exports”, the national oil company said in response to what could be a major blow to the OPEC member.
Mustafa Sanalla, the chairman of the NOC, said in a statement the Libyan military action was in stark contrast to the authority recognized by the international community, including the United Nations and OPEC.
“Instead of defending the rule of law in Libya by handing the Gulf of Sirte ports over to the operational control of the legitimate and internationally recognized National Oil Corp., the Libyan National Army has decided to put itself above the law,” he said.
The NOC last week said it lost two of the five storage tanks at the Ras Lanuf port after militants stormed the facility. As a result, the NOC said its storage capacity was lowered from 950,000 barrels to 550,000 barrels — the damage was catastrophic, it said.
The fire from one of the damage storage tanks is in danger of spreading to three others spared so far.
“This incident will result in the loss of hundreds of millions of dollars in construction costs, and billions in lost sales opportunities,” the NOC stated. “Rebuilding the tanks may take years, especially in current security circumstances.”
Libya subsequently declared force majeure on some crude export contracts last week. Force majeure is a contractual condition related to circumstances beyond the control of the parties involved.
Derek Brower, the head of research at British risk consultancy group Petroleum Policy Intelligence, told UPI the move by the Libyan army jeopardizes the prospect for peace in the country.
“At its worst, this could spark more fighting in Libya or even the partition of the country,” he said Tuesday. “It could also lead to a prolonged shut down of the bulk of Libya’s oil output. Oil is now front and center of the conflict in Libya.”
Conflict has sidelined about a quarter of Libya’s output so far. Malik Subhan, a UAE-based analyst said, “oil has indeed taken the center stage in Libyan conflict”.
Libyan oil production has been hampered by conflicts stemming from civil war that erupted in the wake of the Arab Spring movements earlier in the decade. Intense fighting near export terminals in early 2015 left oil storage depots ablaze and shut in exports for about a month.
As oil production grounded to a halt, the International Energy Agency in the early part of the decade called on member states to release oil from their strategic reserves to offset the loss.
Libya is a member of the Organization of Petroleum Exporting Countries and on the sidelines of a collective agreement to curb production to stabilize a market recovering from the collapse in oil prices in early 2016.
OPEC economists said in their latest monthly market report that Libyan crude oil production last year improved 109.5 percent compared to 2016. Secondary sources reporting to OPEC said Libya produced an average of 955,000 barrels per day.