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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Extreme Weather Causes Production Outages In Libya

Rig

A Libyan oil company has had to significantly reduce oil production at its fields because the hot weather has caused several turbines to stop working. The company is Agoco, a unit of the national Oil Corporation, and the decline in production amounted to some 120,000 bpd, sources wishing to remain unnamed told Bloomberg.

This is only the latest production outage in the troubled North African country that has made exemplary efforts to revive its oil production after the NOC regained control over the export terminals and the fields, and settled its disputes with the Petroleum Facilities Guard. It is also the least significant one, as according to the sources, production in Agoco’s fields will return to normal in a few days.

The outage does, however, highlight the uncertainty of Libyan supply, which has been hovering around 1 million barrels daily for over a year, but has failed to move above this level—and not because Libyan is an OPEC member and as such is constrained by a production quota. It is because the political situation in the country is still so unstable that virtually any group with a grudge against the government—or another group—can block a pipeline or attack any piece of infrastructure and cause a production outage.

A few days ago, for example, protesters blocked the entrance to the Ragouba field, which produces around 5,000 bpd, so tanker trucks could not load crude. These particular protesters demanded social and health care benefits and lifted the blockade when the operator of the field promised to grant these.

Last month, a militant group attacked the pipeline feeding crude from the Waha oil field to the Es Sider export terminal, costing the field operators around 80,000 bpd in lost production. This was the second attack on this pipeline in five months. Waha produces 300,000 bpd, on par with Libya’s largest field, El Sharara, which has also been the target of several attacks. Related: Iran: Trump’s Sanctions Can’t Touch Our Oil

Earlier this year, protests at another field, El Feel, caused yet another outage, resulting in the announcement of force majeure at the 90,000-bpd field. Production at flagship Sharara was also shut down several times over the last few months.

Libya has the biggest crude oil reserves in Africa, but the country has had a hard time getting back on its feet after the toppling of Muammar Gaddafi and getting its oil industry back on its feet. A major step in this direction was made in 2016, when the Libyan National Army—a group affiliated with the eastern Libyan government but working in partnership with the NOC—took over the export terminals and returned control over tem to NOC.

Because of the frequent production outages, Libya has become a major oil price swing factor, and this state of affairs is set to continue in the absence of any sign that the political chaos is about to end anytime soon.

This was most clearly demonstrated last month, when reports emerged that the leader of the LNA, General Khalifa Haftar may be dead. The LNA has been instrumental in installing some semblance of order in the Oil Crescent, and Haftar has been at the helm all this time. The reports suggesting that he might be dead caused a price spike as it became clear there is no clear successor for the head of the LNA. Later the reports were refuted by Haftar’s return to Libya after a lengthy stay abroad, but the issue of succession remains as does the risk of a power grab in case he is no longer able to lead the LNA. Libya, in short, remains a powder keg sitting on billions of crude oil.

By Irina Slav for Oilprice.com

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