Libyan oil output rebounds but disruption risks remain very high

Libyan oil output was back to a one-month high of just under 1.20 million b/d, after weeks of sliding output, sources close to the matter said Jan. 17.

But with Libya's political stability still hanging in the balance due to delayed elections, analysts expect the North African oil producer to suffer more supply disruptions and oil blockades.

Sources told S&P Global Platts there could be an oil blockade in the eastern oil fields and ports, coordinated by the self-styled Libyan National Army, due to delayed payments from Tripoli to eastern forces loyal to its general Khalifa Haftar.

Libyan crude production had fallen to as low as 700,000 b/d in early-January due to a due to a blockade at its key western oil fields along with pipeline maintenance at the eastern Waha oil fields.

A day after the state-owned National Oil Corporation reached an agreement with the Petroleum Facilities Guards militia, allowing for the reopening of the Sharara, El-Feel, Wafa and Hamada oil fields, 350,000 b/d Es Sider terminal in the east of the country was shut due to severe weather and a lack of storage.

But by Jan. 17, the OPEC member was producing near 1.20 million b/d, sources said, with country's largest oil field, producing 290,000 b/d, just 10,000 b/d below its full capacity.

Eastern blockades likely

Some oil workers, and Petroleum Facilities Guards, stationed at the 300,000 b/d Es Sider and 250,000 b/d Ras Lanuf, 250,000 Marsa el-Hariga, 90,000 b/d Brega, and 90,000 b/d Zueitina terminals are closely aligned with the LNA.

Some of these workers are all still awaiting their salaries from the UN-backed government of National Unity and if these are not paid soon, there could be a blockade at these key terminals, sources added.

The LNA in 2030 led an oil blockade at these ports, which lasted for almost eight months. The blockade dragged Libyan output to just under 100,00 b/d, its lowest level since late-2011 when it was in throes of a civil war that led to the downfall of Colonel Moammar Qadhafi.

S&P Global Platts Analytics expects Libyan crude output to average 1.1 million b/d in 2022, but acknowledged that "far lower volumes than this best-case scenario is a rising risk."

"A rivalry between the NOC chairman and interim oil minister underlies the western outage, and is unlikely to subside, while delayed Dec. 24 elections could cause a power struggle between the eastern parliament and caretaker Tripoli government," it added in a recent note.

Libya's crude production averaged around 1.11 million b/d in 2021, according to S&P Global Platts estimates, compared with 360,000 b/d and 1.05 million b/d in 2020 and 2019, respectively.

The country's oil industry has been at the mercy of groups vying for the control of valuable assets since the 2011 civil war, with armed attacks on key pipelines and production facilities.

Libya holds Africa's largest proven reserves of oil, and its main light sweet Es Sider and Sharara export crudes are sought after by refineries in the Mediterranean and Northwest Europe for their gasoline and middle distillate yields.