The suffering of Libyan oil is at the forefront of the scene... and a researcher expects the fields to be closed at any moment - Energy

The Libyan oil sector is still the first victim of the power struggle that has been taking place in the country in recent times, as production has fallen at the level of 800,000 barrels per day, in light of the blockade of the oil facilities and infrastructure of the sector from time to time by protesters.

Expectations indicate that the sector will continue to be affected by the repercussions of these conflicts until the second half of 2022, in light of the renewed clashes, the most recent of which was today, Tuesday, May 17, in the capital, Tripoli.

The situation was exacerbated by the shift in the conflict cycle to talk about the distribution of Libyan oil revenues, at a time when nearly a third of production is still suspended.

Effects of the conflict on Libyan oil

“With the successive developments in the Libyan situation, predicting the closure of any of the major fields is difficult,” says Mahmoud Mohamed, a Libyan engineer specializing in energy.

He explained – in exclusive statements to “Energy” – that the political situation is “very tense”, especially after the attempt of the parallel government head, Fathi Bashagha, to enter the capital, Tripoli, today, Tuesday, and take power.

And Mahmoud Muhammad reiterated that “the closure of the oil fields is possible at any moment, according to the whims of politicians and those who control the scene.”

American ambitions in Libya’s oil

Libyan oil
Conflicts bring Libyan oil production to 800,000 barrels per day in May – Photo by Bloomberg

The Associate Director of Whispering Bell Risk Management in North Africa, Elias Seddiqi, expected that the Libyan oil sector will continue to be affected by the repercussions of local conflicts until the second half of this year, according to Standard & Poor’s Global Platts.

Siddiqui believes that these conflicts and their repercussions on production and export undermine the American ambitions that rely on Libyan oil to ensure the security of supplies following the Russian invasion of Ukraine.

He added that the failure of the conflict – which was renewed today when loyalists to one of the conflicting authorities tried to control the capital, Tripoli – reinforces the continuation of the blockade of the sector and weakens the prospects for resuming production in the coming weeks.

Events indicate that production rates will continue to hover around 800,000 barrels per day this month, with expectations of supplies lowering due to the continued closure of facilities, according to Standard & Poor’s Global Commodities Analysts.

Libyan oil production from the El Sharara field continued to record low rates, estimated at 80,000 barrels per day, which cast a shadow over the flows of the Zawiya port.

The repercussions were not limited to production only, as oil exports have also been subject to force majeure since the National Oil Corporation announced it at the beginning of this month, with an estimated 90,000 barrels per day from Brega port, another 90,000 barrels per day from Zueitina port, and 70,000 barrels per day. from Mellitah port.

revenue distribution

The ongoing conflicts in Tripoli affect the revenues of the Libyan oil sector in the first place, which prompted the US administration to propose that the Libyan leaders adopt a mechanism to monitor and monitor the sector’s revenues. However, the American proposal is facing an unknown fate between the conflicting parties.

The state-controlled oil corporation is seeking to determine the mechanism for managing Libyan oil revenues between the two disputed governments, under US supervision.

The US embassy had expressed – a few days ago – its support for the House of Representatives’ decision to temporarily freeze Libyan oil revenues in the Foreign Bank, but the Oil Corporation has not yet begun implementing the decision.

Observers fear a repetition of the events of 2020, after oil facilities were besieged for 8 months, and production decreased as a result of that step to levels below 200,000 barrels per day, following the dispute over the distribution of Libyan oil revenues.

Over the past decade, the Libyan oil sector has been subjected to civil wars, conflicts, unrest and terrorist attacks that have affected production and export rates.

Libya's Crude Oil Production - February 2022

Possibilities and struggles

Despite the conflicts, Libyan oil topped the list of African countries that offer their consumers the cheapest gasoline prices, according to a report by the American company Zotobi, which confirmed that the drop in gasoline prices is inversely proportional to the state’s enjoyment of oil capabilities.

Meanwhile, conflicts threaten plans to increase Libyan oil revenues, which constitute 97% of state revenues, especially that the State Oil Corporation plans to increase those revenues to $35 billion this year, according to a previous statement by its head, Mustafa Sanalla.

These ambitious plans collided with the repercussions of the ongoing conflicts in the country, after Libyan oil losses were estimated in just one week, mid-April, at nearly 4 million barrels.

Apart from the current repercussions on the sector, Libyan oil constitutes the largest proven African reserves, and its exports have a strong return on European and Chinese refineries.

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