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Libya’s top oil field shut after gunmen close it yet again

A file picture dated 26 August 2011 shows smoke rising from an oil refinery in the eastern oil town of Brega, Libya. EPA/STR

Libya’s biggest oil field is shut after gunmen forced output to stop twice in one day, fresh proof of the challenges the conflict-ravaged North African nation faces in reviving its energy industry from a five-month halt.

The Sharara field in southwestern Libya had stopped producing after armed men entered the site Monday and told employees to end activities. Though operations were briefly allowed to resume, according to people with knowledge of the situation, the group halted output again for the second time in a day, the Tripoli-based National Oil Corp. said on its Facebook page.The NOC has declared force majeure on loadings from the field.The saga at Sharara put Libya’s unpredictability as an oil supplier on full display. The on-again, off-again status threatens a nascent revival of exports from the country, which has produced little crude since January due to a civil war. Almost all its oil ports and fields are blockaded or closed as a result of the seesawing conflict.“This criminal group dared to enter the field with heavy weapons,” NOC Chairman Mustafa Sanalla said in the statement. “Instead of defending the country’s interest and protecting civilians, the members of this armed group have directed weapons against our loyal Libyan workers, who are making tremendous efforts to try to prevent Libya from resorting to banks to borrow to feed its people.”

The NOC had only just lifted a force majeure on crude exports from Sharara on Sunday, as well as from the nearby El-Feel deposit the next day. At that time, Sharara was to start producing about 30,000 barrels a day, with a full ramp-up — to about 10 times that amount — taking three months.

READ: Haftar’s Losses Cloud Outlook for Libya’s Battered Oil Industry

Sustained production from Sharara would signal better times in Libya. The country’s energy industry has been dogged for almost a decade by power struggles and fighting following the ouster of dictator Muammar Qaddafi in 2011.

Libya's been producing almost no oil this year

For other oil producers, extra Libyan barrels would be less welcome, coming at a time when OPEC and allied producers are doing everything they can to keep supplies off the global market and boost prices. They agreed on Saturday to extend historic production cuts of almost 10 million barrels a day through July. Libya, with Africa’s largest oil reserves, is exempted from the restrictions due to its strife.

READ: What’s Behind Nine Years of Turmoil in Libya: QuickTake

Brent crude was trading 1.1% lower at $40.74 a barrel as of 9:35 a.m. in Singapore. The international benchmark is down about 38% this year.

The NOC said earlier that El Feel would probably take two weeks to return to full capacity of around 100,000 barrels a day, due to damage caused by the shutdown there.

Libya’s Oil and Gas Network

In mid-January, the NOC declared force majeure for exports of the Sharara grade of crude from Zawiya, a port near Tripoli. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control. The measure was applied to several ports.

The chaos at the country’s oil facilities came amid a military offensive by Khalifa Haftar, a commander based in eastern Libya, to conquer Tripoli in the west and consolidate his control over the country.

His supporters shut down most crude production in January, and exports plunged from 1.2 million barrels a day to some 90,000. The collapse has cost the oil-dependent nation billions of dollars in lost revenue.

READ: Erdogan Signals Libya ‘Agreement’ With U.S. After Trump Call

However, forces loyal to United Nations-recognized Prime Minister Fayez al-Sarraj have gained ground in the past month, thanks largely to military support from Turkey. They pushed Haftar out of his last stronghold in the west last week.

Haftar has accepted an Egyptian-sponsored cease-fire, though al-Sarraj’s administration said government forces would try to retake the cities of Sirte and Jufra before entering political negotiations to end the war. Regaining Sirte would put them close to the so-called oil crescent, the area containing most of Libya’s oil reserves.

Haftar’s Libyan National Army has so far stymied the forces of al-Sarraj’s Government of National Accord near Sirte.


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