Libya losing $60m per day from oil closures

By Jaysim Hanspal
Posted on Tuesday, 26 April 2022 10:50

A general view shows Libya's El Sharara oilfield
A general view shows Libya's El Sharara oilfield December 3, 2014. REUTERS/Ismail Zitouny

Libya’s oil fields could reopen in days after over a week of armed protests in Libya's ‘Oil Crescent’ region that has nearly halved output has almost halved causing panic as global shortages continue due to the war in Ukraine. 

In a comment to Bloomberg on Monday 25 April, Oil Minister Mohamed Oun said the closed fields could reopen within days.

In a statement on Facebook over the weekend, the Ministry said that members of the committee “are in the process of reaching a final agreement that ends the crisis of repeated closures during recent times.”

“With this, the Ministry of Oil and Gas announces that the resumption of production in the suspended fields will be during these days with the help of Allah Almighty.”

Protests at the new government

Outrage from tribal leaders at the leadership of Prime Minister Abdul Hamid Dbeibah led to protests at oil facilities across Libya. They announced a halt in production of oilfields on 17 April until Dbeibah hands over power to the newly-elected government of Prime Minister Fathi Bashagha of the eastern-based parliament.

Bashagha later called on residents via a tweet in the Oil Crescent region (Tobruk in the east to the Gulf of Sidra in the west) to allow the resumption of oil exports after armed clashes shut down operations spurring an oil crisis.

Damage done

The National Oil Corporation confirmed that several locations in the Zawiya refinery were damaged due to armed clashes, a common occurrence at the complex that the company says “continues to endanger the lives of workers and threaten the process safety, the safety of assets and facilities.”

Minister Aoun noted that the country was losing $60m per day from the closure of oil fields and ports, the equivalent of 500,000 barrels, according to Anadolu Agency.

State-run National Oil Corporation declared force majeure at the Sharara field, which enables a company to avoid contractual obligations due to unforeseen circumstances.

Sticky situation

The country has often faced domestic conflicts over oil and other resources since the 2011 ousting of longtime dictator Colonel Qaddafi.

Oil production has historically been a political issue in the country, accounting for approximately 95% of export earnings.

But a fuel crisis in this case, is a real threat says Jalel Harchaoui, a researcher specialising in Libya .

“The oil blockade that was introduced by Haftar [commander of the Libyan National Army] in January 2020 began with just one facility and then another facility, and then it kind of spread nationally. And then within effectively a couple of weeks, the amount of fuel exported by Libya became zero,” tells The Africa Report.

On Sunday Bashagha visited representatives of the Oil Crescent region to try and resume oil exports.

In an interview with the Telegraph last week Bashagha claimed that the country could make up the West’s current oil shortage in exchange for helping the country grow its infrastructure post-war.

Harchaoui says Bashagha’s visit is exemplary of pressure from the West due to unprecedented global pressure on oil reserves amid the current Russian-Ukrainian war.

“[Bashagha] said that what the people who blockaded the sites wanted was a more transparent management of oil revenues, which is exactly the phrase used by US diplomats who have been working on a new financial mechanism to make the allocation of oil revenues more transparent.”

In a statement by the US embassy, US ambassador to Libya, Richard Norland pushed for the country’s central bank to safeguard oil revenue from misappropriation, rushing through an arrangement intended to depoliticise management of the country’s oil revenues.

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