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DMEA COMMENTARY DMEA

Libya heading for more trouble

The North African state could see oil production levels fall even further in the near future

LIBYA LIBYA’S oil sector has already suffered greatly are not the only problem. The North African
this year as a result of ongoing civil conflict. state has also sustained damage to vital infra-
WHAT: The country has seen crude production lev- structure – to the very facilities that allow the oil
NOC’s latest attempt to els drop precipitously, sinking from more than industry to operate effectively – and it is likely to
restart oil exports has 900,000 barrels per day to less than 100,000 bpd have difficulty with the repairs.
ground to a halt. within just a few months. And there may be “On the top of the $6.5bn in lost produc-
worse to come, as efforts to hammer out a peace tion we as a nation have suffered, NOC faces
WHY: deal falter. huge extra costs to repair infrastructure dam-
LNA-allied troops have age,” Mustafa Sanalla, the company’s chair-
renewed their blockade Background man, explained earlier this month. “The costs
of fields and terminals, The trouble began in late January, when sep- of repairing the pipeline network and surface
allegedly with the help of aratist forces loyal to Khalifa Haftar’s Libyan equipment and of well workovers will run to the
foreign mercenaries. National Army (LNA) began blocking ship- billions of dinars.”
ments from oilfields in the interior to pro-
WHAT NEXT: cessing facilities and export terminals on the Two steps back
Third-party involvement coast. Conditions did appear to be improving last
in the conflict could bring These moves prevented National Oil Corp. month. The peace talks brokered by the EU
oil output down to an (NOC) from exporting its production and earlier in the year gained momentum after
even lower level. impaired its ability to refine crude oil into usa- GNA troops wrested control of some territory
ble petroleum products. As a result, they caused back from LNA and its allies, and NOC, which
grievous harm to the Libyan economy, which is is nominally independent of the rival factions,
heavily dependent on revenues from oil sales. reported that it was conducting discussions on
NOC recently estimated that it had lost $6.5bn the resumption of oil production.
as a result of the clashes between the LNA and Moreover, the company actually managed to
its rival, the Government of National Accord bring some of its assets back online. In early June,
(GNA), which is based in Tripoli. it took the step of lifting force majeure at two of
Making up these losses will be difficult, espe- its largest oilfields, Sharara and El Feel.
cially since global crude prices have retreated Within just a few days, though, NOC had
significantly since January. But market dynamics declared force majeure again. It explained its

P6 www. NEWSBASE .com Week 30 30•July•2020