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Libya' s oil output hit after armed group shuts pipeline

BY SUMMER SAID and SARAH KENT

Libya' s oil production plunged Tuesday to its lowest level since 2011 after an armed group closed the country' s largest western oilfields operated by Eni SpA and Repsol SA, deputy oil minister Omar Shakmak said.

The member of the Organization of the Petroleum Exporting Countries is currently producing 320,000 barrels per day, compared with the pre-war levels of around 1.6 million barrels, Mr. Shakmak told the Wall Street Journal.

"Both El Feel and Sharara fields are closed which is hitting our production badly. The group behind the shutdown of the fields and the pipeline linking them to the port, were not oil workers or Petroleum Facilities Guard members and it is the defence ministry that should protect the fields and fix this problem," he said.

El Feel oilfield is operated by Mellitah--a joint venture between Libya' s state energy firm, the National Oil Corporation, or NOC and Italy' s Eni, while Sharara is run by Akakus--a joint venture between NOC and Spain' s Repsol.

Mr. Shakmak said it is unclear what the armed group, which he described as "third party", wanted or when the oilfields will resume production.

Striking workers have recently hit eastern and central Libyan ports and effectively shut down shipments from terminals there, which account for more than half of Libya' s $60 billion of oil exports annually. The workers, who had already slashed the country' s output by more than half earlier this month, are demanding the payment of wages, as well as higher salaries or more jobs. However, officials said the situation was more precarious, with armed guards trying to sell oil without government approval.

Last week oil exports from the port of Marsa al Brega resumed after a force majeure was lifted as protesters ended their blockade of the terminal. Es Sider, the largest of Libya' s oil terminals with a 350,000 barrel-a-day capacity, as well as Ras Lanuf and Zueitina in eastern Libya remain closed.

Libya' s troubles come at a time when the world' s largest oil producers are facing increasing competition from rising production in places like the U.S., where the extraction of oil trapped inside shale rock has seen output soar.

According to the international Energy Agency, demand for oil from OPEC dipped below 30 million barrels a day in the first quarter of this year and is expected to fall further next year.

According to the IEA, Libya produced just 1 million barrels a day in July.

"In the short term, we are not worried about our market share, but if this continues for longer than just a few days, we are facing a threat from other OPEC producers like Saudi Arabia upping their production and squeeze us out," Mr. Shakmak said.

Dow Jones Newswires

08/28/2013

 

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