Chaotic Libya struggles to maintain oil output

Wed Jun 12, 2013 10:59am EDT

Related Topics

* Protesters increasingly target oil facilities

* State oil firm says output has fallen to below 1 mln bpd

* Higher output targets seem elusive for now

By Marie-Louise Gumuchian

TRIPOLI, June 12 (Reuters) - Libya is struggling to keep its oil output stable - let alone increase it - as protests cut crude exports in the sector that supplies 95 percent of state revenue.

In the past year, disgruntled Libyans have protested at oilfields and export ports, clouding initial optimism over a speedy return to output levels of nearly 1.6 million barrels per day (bpd) following the 2011 war that ousted Muammar Gaddafi.

The state National Oil Corporation (NOC) said on its website output had slumped to less than 1 million bpd following "irresponsible acts by some individuals" who shut down two export terminals and a major oilfield.

"The industry is suffering and this cannot go on as it is," a senior Libyan oil industry source said. "These kind of problems keep recurring and this is hurting the whole of Libya."

The new leadership has struggled to impose its authority on a myriad of armed groups who have the real power on the ground in a country awash with weapons left over from the war.

Protesters, usually with social demands, have forced Tripoli to comply with their requests before ending sit-ins or turning valves back on.

In the latest headache for the industry, the operator of the major El Feel field, a joint venture between the NOC and Italy's Eni, halted output as some 50 protesters staged a demonstration, calling for jobs and salaries. El Feel, which lies in Libya's southwestern desert, can pump up to 130,000 bpd.

In the east, protesters forced the shutdown of the Zueitina and Marsa al-Hariga terminals but workers there said on Tuesday operations were resuming after the demonstrators had left the sites. Zueitina has faced numerous disruptions this year.

"If the protesters go to local councils, nobody will listen to them. But if they go to the oilfields or terminals, they have everybody's attention," a Libyan oil worker said. "This problem keeps happening and the government doesn't know how to cope."

COSTLY DISRUPTIONS

Without specifying, the NOC said the latest output cuts were costing the country "hundreds of millions of dollars" in lost income.

A prolonged drop in output could be disastrous for state finances, already strained by salary spending which now includes tens of thousands of former rebel fighters from the war.

Last month, a committee overseeing Libya's energy industry within the national assembly, said those who forcefully closed down installations should be held accountable in court.

But with state security forces and courts still weak, enforcing such action remains a mammoth task. A 15,000-strong force guarding oil sites lacks proper training and equipment and its members have at times fought amongst themselves.

"We need a government to make strong decisions and guards to protect oilfields," Yussef al-Ghariani, of an oil workers' union in the eastern city of Benghazi, said. "Every delay is costly."

In April, oil flows hit 1.55 million bpd, according to the oil ministry, which has previously said OPEC-member Libya aimed to increase output to 1.7 million bpd from the third quarter.

But with continuous disruptions due to the protests and sometimes technical problems, this target now appears elusive.

"The trend is going in the wrong direction. They are struggling to keep production at 1.3-1.4 (million bpd) whereas they were hoping to be raising it and hitting new peaks," Richard Mallinson, of consultancy Energy Aspects, said.

"The likelihood is only that it will get harder and harder to maintain levels we have seen over the last few months as protests continue and the situation does not improve."

Foreign oil companies are increasingly unsettled by sporadic violence and oil services firms are not rushing to send workers back to Libya.

"You just don't know where things are going. People who were already worried about coming here will be even more reluctant," one foreign oil worker said, declining to be named.

With the continuing chaos tainting Libya's image abroad, oil market players are factoring in more disruptions.

"Every time you get news of one situation being resolved, you just wait and expect to hear what is the next field that is being shut or obstruction to a terminal," Mallinson said. (Editing by William Hardy)

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