Libya Oilfield Write-Off by Total Is Ominous Sign to Other Firms

Smoke rises from the port of the eastern Libyan city of Benghazi on Feb. 14, 2015, during clashes between forces loyal to the internationally recognised government and Islamist militias.

Photographer: Abdullah Doma/AFP/Getty Images

Libya’s civil war is starting to force European oil companies to write off assets in North Africa as militias attack oil fields and terminals.

Total SA became the first major European group to take an impairment in Libya, writing off $755 million from its onshore assets, the Courbevoie, France-based producer said in its quarterly statement on Tuesday. Eni SpA and Repsol SA, which have much larger operations in the North African nation, have yet to mark down the value of their assets.

“The beginning of 2015 has been marked by rising geopolitical tensions,” Total said the statement. “Due to deteriorating security,” the company said it halted production in Libya in February.

Libya is producing 500,000 to 600,000 barrels a day, well below the pre-war level of 1.5 million barrels. Total Chief Executive Officer Patrick Pouyanne told reporters earlier this month that many onshore oil installations have been damaged in the most recent wave of unrest. Militias backed by rival governments in Tripoli, the capital, and Benghazi, the main city of eastern Libya, have this year attacked oil fields and terminals that were largely spared during the war that toppled the 42-year long regime of Muammar Qaddafi in 2010.

In February, gunmen stormed and briefly captured the Al-Mabruk field operated by Total as part of a joint venture with Libya’s state-run National Oil Corp.

Eni, which reports first-quarter results this week, has been able to sustain output in Libya. Like the Italian company, Madrid-based Repsol hasn’t written down its assets in the country, although it has suffered from intermittent production outages.

Total also took a $75 million impairment on its onshore oil operations in Yemen as a four-week bombing campaign by Saudi Arabia against Shiite Houthi rebels marked an escalation in the Middle East nation’s civil war. The French company halted oil production there in April.