Page 4 - DMEA Week 04 2020

DMEA COMMENTARY DMEA
Libya still sinking
Oil production, revenues continue to drop amidst fighting between GNA and LNA forces
Sharara, Libya’s largest oilfield, has suspended production.
LIBYA
WHAT:
NOC chief says Libya’s crude output has fallen to 262,000 bpd.
WHY:
Haftar’s LNA has blocked export routes, and the country does not have enough storage to keep oilfields in production.
WHAT NEXT:
Without foreign assistance, Libya could see yields shrink to 72,000 bpd in the near future.
LIBYAN oil production has fallen further over the last week, as conflict continues to rage between the Government of National Accord (GNA) and the Libyan National Army (LNA), led by military commander Khalida Haftar. (The GNA, which enjoys wide international recognition, is trying to defend its position in Tripoli, while Haftar is looking to expand his power beyond his base in the eastern part of the country.)
Mustafa Sanalla, the head of Libya’s National Oil Corp. (NOC), told Bloomberg TV in an interview on January 28 that the country was now producing just 262,000 barrels per day of crude. This is almost 35% below the figure of about 400,000 bpd reported in mid-January, and it represents a drop of nearly 78% on the figure of 1.174mn bpd recorded before the latest round of fighting between GNA and LNA troops.
It is also the lowest output recorded figure since 2011, when Libya’s former leader Moam- mar Qaddafi was forced out of power.
According to Sanalla, the North African country has the potential to go even lower. Out- put levels could drop to as little as 72,000 bpd within just a few days, he told Bloomberg.
Such a development would put pressure on world oil markets, the NOC chief added. “The loss of Libyan oil production will have a bad effect on the price,” he commented.
He went on to say that his company had no choice but to declare force majeure and
suspend deliveries earlier this month, after troops loyal to Haftar engaged in fighting in areas close to key infrastructure facilities. Libya does not have the storage capacity to support continued development under current condi- tions, he explained.
Sanalla was referring to the LNA’s recent storming of Zueitina, a port that boasts exten- sive oil export facilities, and moves to block oil exports from other ports in the eastern part of the country. Since mid-January, Haftar’s faction has also succeeded in forcing the Hamada-Zaw- iya pipeline to halt operations. In turn, without the pipeline, NOC subsidiaries have had to sus- pend production at Sharara and El Feel, two of the country’s largest oilfields, and declare force majeure
The heavy costs of conflict
These clashes have already cost the country some $318mn, by the NOC’s estimates. They have the potential to continue undermining upstream operations in the future, as they are preventing the company from implementing its investment programme.
On January 28, Sanalla said in a statement that NOC had been trying to secure budget funds for an “ambitious [effort] to expand oil production.” So far, it has not been successful, as authorities in Tripoli have not been able to release the money because of the LNA’s blockade of export facilities, he explained.
P4
w w w. N E W S B A S E . c o m Week 04 30•January•2020