Libya output drops to post-March low as biggest field halted

7/31/2019

CAIRO (Bloomberg) --Libya’s oil production dropped to about 950,000 bpd, its lowest in five months, after the unauthorized closing of a valve on a pipeline linking the country’s largest oil field to an export terminal on the Mediterranean Sea.

The Sharara field started shutting down on Tuesday at 10 p.m., four people familiar with the matter said, asking not to be identified because the information wasn’t public. The deposit, which can pump about 300,000 bpd, is operated by a joint venture between Libya’s National Oil Corp. and Total SA, Repsol SA, OMV AG and Equinor ASA.

The NOC declared force majeure on Sharara oil on Wednesday, according to two people familiar with the situation who requested anonymity because the information isn’t public. Loading at the Zawiya oil port was also suspended, they said.

Sharara was also briefly shut and force majeure announced about 11 days ago after an unidentified group closed a valve there. Libya’s current, reduced production figure was confirmed by a person with knowledge of the situation who lacked authorization to speak to media and asked not to be identified.

Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control.

Libya holds Africa’s largest proven oil reserves but has endured severe disruptions to its output and exports due to battles and blockades among rival armed groups. Earlier in July, before the first halt of the month at Sharara, the NOC said oil production was about 1.3 MMbpd -- its highest in six years but still well below the level of output before the civil war that overthrew dictator Moammar Al Qaddafi in 2011.

Sharara in southwestern Libya has experienced sporadic shutdowns as various groups press political or financial demands. Production there stopped for three months late last year after guards and armed residents seized the field and demanded payments, costing the NOC about $1.8-billion in lost oil sales.

OMV lowered its production forecast on Wednesday, citing a first-quarter shutdown in Libyan production as one of the main reasons. Although that particular incident was resolved, the security situation in Libya has affected the Vienna-based company’s output, Chief Executive Officer Rainer Seele said in an interview.

Libya’s oil revenues are expected to drop by as much as 17% in 2019 to $20 billion as a result of disruptions in output, Tripoli-based central bank Governor Sadiq Al-Kabir said in an interview last week.

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