Pipeline closure risks taking nearly all Libya's oil offline

CAIRO (Reuters) - Two major oilfields in southwest Libya began shutting down on Sunday after forces loyal to Khalifa Haftar closed a pipeline, potentially reducing national output to a fraction of its normal level, the National Oil Corporation (NOC) said.

The closure, which follows a blockade of major eastern oil ports, risked taking almost all the country’s oil output offline as international leaders met in Berlin for a peace summit on Libya.

If exports continue to be blocked, storage tanks will fill in a few days and production will be limited to 72,000 bpd from offshore fields and the western Wafa field, an NOC spokesperson said.

Libya has been producing around 1.2 million barrels per day (bpd) of oil in recent months, and almost all fields lie in areas controlled by Haftar’s eastern-based Libyan National Army (LNA).

The NOC said guards under LNA command had shut down the pipeline leading to the western coastal city of Zawiya on Sunday, forcing the corporation to limit oil production at the Sharara and El Feel oil fields.

El Sharara, operated by the NOC in a joint venture with Spain’s Repsol, France’s Total, Austria’s OMV and Norway’s Equinor, has production of around 300,000 bpd. El Feel, operated by the NOC and Italy’s Eni, produces about 70,000 bpd.

Haftar’s LNA has been waging an offensive since April to capture the capital, Tripoli. It is one of two main factions that international powers wanted to agree to a ceasefire in Berlin.

Ahead of the summit, oil ports and oilfields in Libya’s east were shut down, closures that the NOC said were directly ordered by the LNA and would lead to the loss of 800,000 bpd.

The move was seen as a pressure tactic ahead of the summit, though the LNA has sought to portray it as the result of popular pressure.

A southern Libyan group, Fezzan Anger, had earlier said it was preparing to shut down the El Sharara and El Feel fields to press their economic and security demands.

Eastern groups aligned with the LNA have long tried to gain control over oil exports and revenues, which are channelled through the central bank and the internationally recognised government in Tripoli.

The Tripoli-based NOC, which says it is neutral and deals with all parties in Libya’s conflict, has warned that any shutdowns could have a lasting impact.

“The oil and gas sector is the lifeblood of the Libyan economy and the single source of income for the Libyan people,” NOC Chairman Mustafa Sanalla said on Friday. “They are not cards to be played to solve political matters.”

Foreign powers agreed in Berlin to strengthen an arms embargo on Libya and shore up a shaky ceasefire, but the meeting was overshadowed by the blockades.

Additional reporting by Ayman al-Warfalli in Benghazi; Editing by Pravin Char and Nick Macfie