Libya oil output set to recover following halt at Sharara field

By Salma El Wardany and Saleh Sarrar on 10/3/2017

CAIRO and DUBAI (Bloomberg) -- Libya’s oil production is set to recover from a five-month low as the North African supplier’s biggest field restarts following a brief halt.

The OPEC member’s output is expected to rise to 1 MMbpd from 800,000 within 2-3 days as Sharara oil field restarts Tuesday, National Oil Corp. Chairman Mustafa Sanalla said Monday in a televised interview on Libya TV. The field produced about 234,000 bpd before guards that were assigned to secure the field forced workers to halt production Sunday. Sanalla said he gave instructions to resume operations at the field after talks with tribesmen and some other guards to resolve the issue.

Overall production is expected to reach 900,000 bpd Tuesday, Sanalla said. The NOC lifted force majeure, a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control, declared Sunday, Sanalla said in a press conference in Tripoli after the televised interview. On Tuesday, the field was still shut as the armed group kept making demands for wages and other claims, according to a person familiar with the situation who asked not to be identified because they aren’t authorized to speak to media.  The brief halt at Sharara is yet another reminder of the challenges Libya faces in trying to restore and maintain oil output after years of internal conflict. The country, which holds Africa’s largest crude reserves, is currently producing at its lowest level since April, data compiled by Bloomberg show. Libya was pumping 1.05 MMbpd in August just before armed men closed a pipeline linking the field to a port and causing Sharara to halt pumping for more than two weeks.

Security, technical and financial challenges are hindering the NOC from reaching its previously announced target of 1.25 MMbpd this year, Sanalla said.

Sporadic disruptions

Sharara has endured sporadic shutdowns and disruptions this year due to protests, power blackouts and security issues. The giant field in western Libya, run by a joint venture between the NOC and Repsol SA, Total SA, OMV AG and Statoil ASA, is crucial to the nation’s oil recovery. Output had reached a four-year high in July before a spate of shutdowns at various fields stalled the recovery.

The partial revival in Libyan production has coincided with efforts by the Organization of Petroleum Exporting Countries and other producers to cut output to rein in a global glut. Iran and the United Arab Emirates are among OPEC nations that have expressed concern that rising production in Libya and Nigeria, which were both exempt from cutting, is complicating the group’s push to rebalance the oil market and prop up prices. OPEC agreed in November to let Libya and Nigeria pump at will due to their internal strife.

Libya pumped 1.6 MMbpd before a 2011 revolt led to the collapse of central authority and years of fighting among rival governments and militias vying to control its energy wealth. Libya isn’t planning to join any agreement to curb output until it reaches and maintains its target of pumping 1.25 MMbpd by December, two people familiar with the situation said in July.

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