Although the world is watching the war in Syria, especially now that the conflict is pulling in more outside powers, there is another oil producer that is riddled with violence and conflict.
Libya has been torn apart by violence since the downfall of Muammar Qaddafi. The country is now effectively split, with two factions fighting a stalemate for territorial control. The violence has crushed the country’s oil sector, the backbone of the economy. Oil exports have dropped to 300,000 barrels per day, a catastrophic decline from the 1.6 million barrels per day the country produced before the onset of civil war. Related: Has Oil Finally Bottomed?
There is a glimmer of hope, however. Libya’s export capacity just increased at the port of Zueitina, located in the country’s east, according to Bloomberg. The port began to load and ship 600,000 barrels of oil. The shipments will be the port’s first in six months, after a protest shut down the pipeline that supplies the terminal. The port has an export capacity of 70,000 barrels per day.
However, the country’s largest port, Es Sider, is still offline.
Moreover, war will keep Libya from seeing its oil sector rebound anytime soon. The UN is facilitating peace talks between the two warring factions – the internationally-recognized government, which is stationed in the east, and the rival faction Libya Dawn, based in Tripoli. The peace talks are being held in Morocco. Related: Lithium Market Set To Explode – All Eyes Are On Nevada
The conflict is scaring away international energy companies. The internationally-backed government in the east held a conference in Malta in September, hoping to attract interest from energy companies. The government is trying to setup a new national oil company, as the old firm is now held by Libya Dawn in Tripoli. Investment from energy firms would provide more funds for the recognized government, helping it gain leverage over its enemy. However, while about 30 operators attended, none are willing to do business until the two governments make peace. The risks are simply too high for new investment.
In the past, the outage of supply from Libya has contributed to a spike in international oil prices. However, with the current glut of global supplies, the world is hardly missing Libyan oil.
By Charles Kennedy of Oilprice.com
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