Libya Oil Growth Crimped as Gunmen Block Eastern Port Hariga

Photographer: Mahmud Turkia/AFP via Getty Images

A general view shows the Hariga oil port and loading installation in Tobruk. Protests last year halted ports and oil fields in what was once Europe’s third-largest crude supplier, helping drive up the price of Brent oil as much as 21 percent in four months to August. Close

A general view shows the Hariga oil port and loading installation in Tobruk. Protests... Read More

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Photographer: Mahmud Turkia/AFP via Getty Images

A general view shows the Hariga oil port and loading installation in Tobruk. Protests last year halted ports and oil fields in what was once Europe’s third-largest crude supplier, helping drive up the price of Brent oil as much as 21 percent in four months to August.

Hariga, the biggest oil terminal in east Libya run by the central government, can’t export because gunmen nearby pose a threat to tankers, the port’s inspection and measurement coordinator said. Curbs on the sales helped lift crude prices to a six-month high last year.

“There’s an armed group in boats facing the port, and some men with guns are on the coast itself,” Abdel-Wahab Salem Mohammed said in a phone interview from the facility on Jan. 20. “One person with a rocket propelled grenade can close the entire thing.”

Protests last year halted ports and oil fields in what was once Europe’s third-largest crude supplier, helping drive up the price of Brent oil as much as 21 percent in four months to August. While the country boosted production almost threefold in the past month, shipments through ports such as Hariga have failed to keep pace.

The Hariga gunmen are prolonging a dispute that started in July with local youths seeking jobs. The protesters at the port are separate to a group led by Ibrahim Al Jedran, whose forces control three other halted terminals in the east. While trucks and boats are loading refined products at Hariga for domestic consumption, and the adjacent Tobruk refinery is still supplying fuel to power plants, crude exports are blocked, Mohammed said.

Brent futures climbed as high as $117.34 a barrel on Aug. 28 last year, having traded at $96.75 four months earlier. The North Sea grade, a benchmark for more than half the world’s oil, retreated 3.9 percent to $106.46 this year after the opening of Sharara, Libya’s second-biggest oil field.

Third Largest

A power struggle among tribes and regions is undermining the national government’s authority and disrupting oil flows from fields and ports. The country is currently pumping about 650,000 barrels a day, compared with about 1.55 million before the uprising that led to former leader Muammar Qaddafi’s ouster and subsequent killing in 2011.

European countries imported $36.5 billion of Libyan crude in 2012, according to data from ITC TradeMap, a venture between the World Trade Organization and United Nations. The commodity accounts for almost all the North African country’s exports.

The halt in overseas shipments from Hariga and stoppages at three other eastern ports cost Libya $10 billion in lost oil sales last year, Deputy Oil Minister Omar Shakmak said Jan. 16. All four have been closed since late July. The three others are Es Sider, Ras Lanuf and Zueitina, controlled by forces led by Al Jedran, who wants the Barqa region to sell oil independently from the central government.

Government Control

‘‘Protests keep happening,’’ Mohamed Elharari, a spokesman for National Oil Corp., the state oil company, said last week in an interview from Tripoli. “This opens, then this closes,” said the official. He estimated Jan. 21 that exports were about 450,000 barrels a day.

Brigadier Idris Bukhamada, head of the Petroleum Facilities Guard protecting Hariga’s terminal, said by phone from Tripoli Jan. 20 that he’s worried about a possible attack on “any docking ship.”

The export curbs are straining Libya’s central government. Prime Minister Ali Zaidan survived a no-confidence motion in parliament this week. Oil Minister Abdulbari Al-Arusi was among five ministers to withdraw from the government to protest Zaidan remaining as premier.

Unrest is continuing. Officials working in Libya’s oil industry said at least four times last year that halted eastern ports would resume shipments. Mohammed, the Hariga port official, said he’s skeptical the government can reopen the facility. Clashes in the Libyan capital left 30 people dead and 150 injured, Al Arabiya television station reported yesterday.

Zaidan’s Offer

Zaidan is seeking to do a deal with the protesters at Hariga to allow exports and an accord would strengthen his position in talks to halt stoppages at the other ports, Eurasia Group, a political-risk consultant, said in a report yesterday. Protesters at Hariga previously demonstrated a willingness to deal with the government and break ranks with Al Jedran, Eurasia said.

Hariga and the three other halted ports are in Libya’s Barqa region, which was declared semi-autonomous last year by Al Jedran, a former commander in the military unit that protected oil facilities.

The armed men outside Hariga, which is 1,000 kilometers (600 miles) east of Tripoli, support the creation of a Barqa region in a revival of the three-region federal system in place until Libya’s unification in 1963, according to Mohammed.

Al Jedran and the Hariga protesters accuse the government of stealing crude and reselling it for its own benefit, Ibrahim Al Awami, head of the Oil Ministry’s inspection and measurement department, said Jan. 20 by phone from the capital. Officials in Tripoli deny the accusations. Al Jedran announced that he and his men would handle sales from the region that’s home to more than half of Libya’s oil production.

Recognition

Prime Minister Zaidan said he doesn’t recognize the movement and an arrest warrant was issued for Al Jedran in August. Zaidan said this week the government has opted for more mediation with tribal leaders.

Exporting from Hariga could add another 110,000 barrels a day and curb crude prices by about $1 a barrel, Abhishek Deshpande, a London-based analyst at Natixis SA, said by e-mail Jan. 20. Still, the government has had little success in reigning in militia and tribes, he said.

“The expectation of a rapid normalization of oil production in Libya has given way to a more realistic appraisal of the situation,” Eugen Weinberg and Carsten Fritsch, commodity analysts at Commerzbank AG in Frankfurt, wrote in a report Jan. 21.

To contact the reporter on this story: Mariam Sami in Cairo at msami2@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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