Libya's Oil Output Drops After Biggest Field Closes

  • Production fell to 560,000 barrels a day after pipeline shut
  • OPEC nation was pumping 700,000 barrels a day on March 22

Libya’s biggest oil field was said to stop producing, leading to a 20 percent decline in crude output from the country with Africa’s largest reserves.

The OPEC nation’s output dropped to 560,000 barrels a day, according to a person familiar with the matter who isn’t authorized to speak to the media and asked not to be identified. The North African country was pumping 700,000 barrels a day, Mustafa Sanalla, chairman of state-run National Oil Corp., said on March 22. Oil prices rose as much as 2.2 percent.

The pipeline carrying crude from Sharara, Libya’s biggest field, to the Zawiya refinery stopped operating, the person said. It wasn’t clear why the pipeline was shut. The NOC didn’t respond to calls seeking comment.

The NOC declared force majeure on loadings of Sharara crude from the Zawiya oil terminal and on loadings of Wafa field condensate from the Mellitah terminal, according to a different person familiar with the situation, who asked not to be identified for lack of authorization to speak to the media. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control. 

‘Unstable’ Situation

Clashes among rival armed groups in early March led to the closing of two of the nation’s biggest oil export terminals, forcing a number of other fields to halt production. The ports have since reopened. Libya pumped as much as 1.6 million barrels a day before a 2011 uprising led to the ouster of former leader Moammar Qaddafi and a breakdown in central authority that stunted oil production. Libya is one of the smallest members of the Organization of Petroleum Exporting Countries.

“The important question for the market will be whether this turns into a lengthy disruption or not,” Richard Mallinson, an analyst at Energy Aspects Ltd. in London, said by email. “The political and security situation remains deeply unstable and so I am not surprised to see Libyan output continue to fluctuate on these kinds of issues.”

Brent crude, a global benchmark, rose $1.12 to $51.87 a barrel, the most since March 15, and was trading at $51.63 a barrel at 8:43 p.m. in Dubai.

Sharara, in western Libya, had been producing 221,000 barrels a day, the NOC said March 21. Spain’s Repsol SA is an operator of Sharara. The Eni SpA-developed Wafa oil field, farther to the west near the Algerian border, is also shut, the person said. Wafa has capacity to produce about 35,000 barrels a day.

— With assistance by Grant Smith, and Hatem Mohareb

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