(Reuters) - A blockade on oil ports and fields in Libya is shutting down production from the OPEC member, potentially taking more than one million barrels per day (bpd) of oil off the market.
The blockade is tied to a conflict between rival factions based in the east and west of the country, and an offensive by eastern-based forces against the capital, Tripoli.
With ports and fields in the east and south closing, production could drop to 72,000 bpd from the western Wafa field and offshore, the National Oil Corporation (NOC) has warned.
Before the blockade, Libya was producing about 1.2 million bpd.
That is well under the 1.6 million bpd that Libya was pumping in the years before the 2011 uprising against Muammar Gaddafi, but higher than during most of the period since his overthrow.
Libya has the largest proven reserves of oil in Africa, and has been a key supplier of light, sweet crude.
It is an OPEC member, though it has been exempted from a 1.7 million bpd output reduction agreed by the group and its allies in December.
Revenue from oil sales is Libya’s only significant source of dollar income, earning $22.5 billion in 2019 for a country with a population of just six million.
Oil is marketed by the state-run NOC and money flows through the Central Bank of Libya (CBL) in Tripoli.
The CBL distributes public salaries, which account for more than half of all public spending, across the country.
But groups in eastern Libya have long complained that they get less than their fair share, an accusation the CBL denies.
They also say oil revenues are being used to prop up powerful armed groups in Tripoli.
Libya’s divisions surfaced during the NATO-backed uprising against Gaddafi. Since 2014, the country has been split into rival camps in Tripoli and the east, each with its own set of institutions.
Most of Libya’s oil facilities are in areas controlled by forces loyal to eastern-based commander Khalifa Haftar, who has gradually expanded his power over the past six years with the help of foreign allies, including the United Arab Emirates, Egypt and Russia.
Since April, Haftar’s Libyan National Army (LNA) has been waging an offensive against forces aligned with the internationally recognised government in Tripoli, which is backed by Turkey.
As world powers gathered in Berlin to try to revive a peace process upended by Haftar’s campaign, eastern oil export terminals and then major oilfields in the southwest were shut, in an apparent power play.
Authorities in the east presented the closure as the result of popular pressure. The NOC said it was directly ordered by the LNA.
The effect of the latest blockade on global oil prices has been limited and largely outweighed by other factors, with an expectation by analysts that the stoppage will be short-lived.
The humanitarian impact could be significant, given Libya’s dependence on oil revenues.
Previous fluctuations in oil production have crippled Libya’s economy and contributed to a rapid downward slide in living standards.
A number of international oil firms have a presence in Libya including France’s Total, Eni of Italy, U.S. firms ConocoPhillips and Hess, and Germany’s Wintershall.
Western powers including the United States have sought to protect the NOC and the CBL in Tripoli, while urging them to be more transparent about oil revenues.
They have blocked attempts by the east to sell oil independently of Tripoli, invoking U.N. Security Council resolutions to do so.
Public Western reaction to the blockade has been hesitant, reflecting internal divisions. Several days after the shutdown began, the United States, European Union and Britain expressed concern, calling for the NOC to be allowed to resume operations.
Writing by Aidan Lewis; Editing by Ulf Laessing and Pravin Char