Libya’s oil output grinds to halt as Berlin peace talks end

Members of the Petroleum Facilities Guard under the command of General Haftar’s Libyan National Army shut down the Hamada-Zawiya oil pipeline. (Photo: AFP)

Libya’s biggest oil field began to halt production after armed forces shut down a pipeline, compounding supply disruptions that are continuing after a conference that aimed to broker an end to the OPEC nation’s civil war concluded in Berlin.

The country’s oil production will be limited to 72,000 barrels per day once its storage tanks are full, according to a spokesman for the National Oil Corporation, down from more than 1.2 million barrels per day on Saturday. That’s the lowest level since August 2011, data compiled by Bloomberg show.

Global oil prices jumped in Asian trading on Monday as the disruptions coincided with the shutdown of some oil output in Iraq, reigniting fears over the market’s vulnerability to geopolitical risk in key supply regions.

The remaining production will come from offshore fields and the Wafa oil field. The Sharara field, which can pump 300,000 barrels a day, will stop producing once its tanks are full, a person familiar with the situation said.

The output plunge started when eastern Libyan commander Khalifa Haftar blocked exports at ports under his control, according to a statement on Saturday from the state-run National Oil Corp. The NOC declared force majeure, which can allow Libya -- home to Africa’s largest-proven oil reserves -- to legally suspend delivery contracts.

Members of the Petroleum Facilities Guard under the command of General Haftar’s Libyan National Army shut down the Hamada-Zawiya oil pipeline, forcing the NOC to limit oil production at the Sharara and El Feel fields, according to an NOC statement. The Hamada station hosts pipelines for Mellitah Oil Co. and Akakus, the operators at El Feel and Sharara respectively, it said.

“This is a policy-related disruption, said Edward Bell, director of commodity research at Dubai-based bank Emirates NBD PJSC. “There could be a pretty quick turnaround if there’s a political solution.

Crude Prices

Brent crude jumped as much as 1.8 percent in London to $66 a barrel, but the move was muted compared with the reaction to the attacks on Saudi Arabian oil facilities on Sept. 14. Libya has less production at stake than Saudi Arabia, and its difficulties are more contained than the Saudi crisis, which threatened to escalate into a regional war, he said.

General Haftar’s show of force came as he prepared to attend an international conference in Berlin on Sunday hosted by German Chancellor Angela Merkel to find a solution to conflict in the country. World leaders at the meeting agreed to work toward a more durable cease-fire in the civil war.

GeneralHaftar, who is backed by Russia but walked out of truce talks in Moscow last week, and Libya’s UN-recognized Prime Minister Fayez al-Sarraj will now put forward five names each for a committee to hash out the terms of a more permanent halt to fighting, with the United Nations pushing for a meeting of that group in Geneva within days.

By shutting down oil fields, Haftar is denying a key source of revenue to the internationally recognized government of Prime Minister Fayez al-Sarraj. Funds from oil production go to the country’s central bank, and the Tripoli government has them money to buy weapons for its defense.

Russian mercenaries have supported Haftar’s forces, according to officials who told Bloomberg. Egypt and the United Arab Emirates are also backing Haftar. Turkish soldiers are training forces loyal to Sarraj, and Turkish-backed Syrian rebels have also joined the fray.
 

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Last Update: Wednesday, 20 May 2020 KSA 10:05 - GMT 07:05
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