Page 8 - AfrOil Week 03 2020

AfrOil POLICY AfrOil
Continued conflict in Libya hits oil sector
Crude production plummets below 400,000 bpd following LNA attacks on export infrastructure
LIBYA
LIBYA’S oil industry has suffered a series of blows over the last few days, as conflict con- tinues to rage between the Government of National Accord (GNA) in Tripoli and the Lib- yan National Army (LNA), led by military com- mander Khalifa Haftar.
According to Libya’s National Oil Corp. (NOC), problems arose at the weekend, when troops loyal to Haftar stormed Zueitina, a port that boasts extensive oil export facilities, and began to block oil exports from other ports in the eastern part of the country. They did so to support the LNA’s efforts to seize control of Tripoli, the seat of the GNA.
Subsequently, members of the LNA’s Petro- leum Facilities Guard began forcing the Ham- ada-Zawiya pipeline to halt operations, the company said in a statement. These events drove NOC subsidiaries to suspend produc- tion at Sharara and El Feel, two of the country’s largest oilfields, and declare force majeure, it reported.
They also brought Libyan oil output down from about 1.174mn barrels per day to less than 400,000 bpd, it added. This was the lowest out- put figure recorded since 2011, when Libya’s former leader Moammar Qaddafi was forced out of power.
The shutdown happened shortly before Haftar travelled to Berlin for a meeting with Fayez el-Serraj, the head of the GNA. That meeting, which was brokered by various West- ern countries and other states allied with the parties to the conflict, did not lead a cease-fire or any other noticeable advancements in the diplomatic arena.
Market reactions
Nevertheless, it did unsettle world oil markets at the beginning of the week. On January 20, crude prices went up slightly in response to fears of supply disruption.
Later, though, markets seemed to shrug off most of the spike in geopolitical risk. Prices went down on January 21, as traders concluded that world fuel markets remained well supplied.
Fatih Birol, the head of the International Energy Agency (IEA), summed this sentiment up neatly on January 21. He told Bloomberg TV in an interview that oil markets had responded to events in Libya in a relatively calm manner because “the world is awash with oil, mainly coming from the United States.” He was speak- ing during the World Economic Forum (WEF) meeting in Davos, Switzerland.
Jeff Currie, the head of commodities
research at Goldman Sachs Group, concurred, saying that oil markets were reacting relatively calmly to events in Libya. “It would have to be a very substantial disruption to push prices above $70 a barrel on a sustainable basis,” Currie told Bloomberg TV in an interview. “The US is still sitting on an enormous amount of inventory.”
Production concerns
Both Birol and Currie were speaking on the same day that the US Embassy in Tripoli expressed its concern about the events that led to the disruption of Libyan oil flows. In a state- ment, the embassy called for production to resume immediately at Sharara and El Feel.
Amrita Sen, the chief oil analyst at Energy Aspects, had said on January 20 that she did not expect the LNA to keep the fields offline indefi- nitely. “We expect the current scale of outages to be fairly short-lived ... as there is limited upside for Haftar to slow the country’s oil revenues to a trickle,” she said. “The current closures are clearly a power play aimed at boosting Haftar’s leverage amid international efforts to broker peace in the country.”
The NOC issued a statement recently urging the LNA not to close down terminal facilities or take other actions that might lead to the sus- pension of oil exports. “The oil and gas sector is the lifeblood of the Libyan economy ... [It] should not be used as a card for political bar- gaining,” remarked Mustafa Sanalla, the com- pany’s chairman.
The state-run company has been trying to strike a balance between the GNA and the LNA for some time in order to ensure that the oil industry continues to function. At the same time, it has also retained control over oil rev- enues, which account for the largest share of funds coming into Libya.inflation. ™
Production stoppages did not affect the Zawiya refinery immediately (Photo: NOC)
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w w w. N E W S B A S E . c o m Week 03 22•January•2020