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Libya Oil Output Decline Threatens Public Sector Pay, MP Says

Libya’s government may stop paying civil servants by the end of the year as protests at petroleum facilities curtail the nation’s oil output to one-tenth of its capacity, a lawmaker warned today.

The North African state is now producing 150,000 barrels a day, after losing 50,000 barrels in daily production yesterday because of strikes by workers and security guards over pay and allegations of corruption, Sliman Qajam, a member of the parliamentary energy committee, said in a telephone interview in Tripoli. Libya needs to produce 400,000 barrels a day just to afford public-sector salaries, he said.

“The government is running on its reserves,” Qajam said. “If the situation doesn’t improve, it won’t be able to pay the salaries by the end of the year.”

The loss of Libyan oil production should be the “real price driver,” in crude markets, Vienna-based JBC Energy said in a research note last week. U.S. threats to attack Syria compounded the impact of Libya’s supply disruption in pushing Brent crude to a six-month high of $117.19 a barrel on Aug. 28. Libya holds Africa’s largest proven oil reserves, according to BP Plc’s Statistical Review of World Energy.

Dar Al-Ifta, the nation’s highest religious authority, prohibited the protests in a decree published on the state-run National Oil Corp. website. “While sit-ins constitute legitimate measures to assert what’s right and end what’s wrong, they are prohibited if they cripple vital services such as oil companies and hospitals,” it said.

The government denies allegations by some members of the Petroleum Facilities Guard that crude had been sold illegally. Prime Minister Ali Zaidan threatened to resort to force should negotations with the striking staff fail, in comments published in newspapers yesterday.

Libya produced 575,000 barrels a day on average in August, the lowest monthly rate since the 2011 overthrow of Muammar Qaddafi, according to data compiled by Bloomberg. It has an installed capacity of 1.6 million barrels a day and last pumped at that level in July 2012, the data show.

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