Libya - Oil Exports drop

[dan_s]

Pipeline difficulties represent 20% drop in national oil output
Oil prices jumped today on news of major supply disruptions in Libya, with WTI gaining 2.13% to close at $49.40/bbl. Libyan output dropped to 560 MBOEPD after one of the main pipelines in the country shut down.

Mustafa Sanalla, chairman of Libya’s NOC, reported the country was producing 700 MBOEPD on March 22, meaning the recent drop represents a 20% decrease in production. The pipeline carrying crude from Sharara, Libya’s biggest oil field, to the Zawiya ceased operation today. It is currently unclear which group is responsible for the stoppage.

Libya’s NOC declared force majeure on loadings of Sahara crude from the Zawiya terminal, according to Bloomberg. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control. Reuters reports that the 600,000 barrel Sea Vine, an Australian tanker, was scheduled to load crude from Sharara later this week. In light of the pipeline shutdown, this booking has been canceled.

Shutdown is just one of many disruptions

This disruption is the latest in a series of difficulties the country’s oil industry has suffered. Rival groups regularly clash and often halt pipeline or port operations, demanding payments. In early March, for example, an armed group seized Libya’s biggest port, Es Sider, and halted activities. This port has only loaded one oil tanker since the stoppage, loading the Demetrios yesterday.

Libya produced about 1.6 MMBOEPD before the 2011 revolt, but the upheaval following Muammar Gaddafi’s overthrow severely curtailed production. In August, for example, production averaged 260 MBOEPD. Libya’s NOC has ambitious plans to restore production, however, with plans to reach 800 MBOEPD by the end of April. While the country has more than sufficient infrastructure to achieve this goal, it remains to be seen if government-aligned forces can create the stability that this level of production requires.