Libya's El-Feel oilfield offline as shutdowns take effect

Key Libyan crude projects were taken offline Aug. 27, including the 70,000 b/d El-Feel field, as attempts by the country's eastern political faction to shut down the country's oil production started to take effect.

Italian energy group Eni operates El-Feel alongside state-owned Libyan National Oil Corporation through the Mellitah joint venture.

In a statement to S&P Global Commodity Insights late Aug. 27, Eni confirmed the project "is currently shut down" and said it would continue to "monitor and manage the situation."

Meanwhile, the Sirte and Waha oil companies both said in statements that they were gradually reducing output. The two companies produce roughly 200,000 b/d of oil between them. There were also reports of smaller fields in southeast Libya cutting output.

The closures come a day after Libya's eastern government in Benghazi vowed to close all oilfields, terminals and facilities in the country, which sources have tied to a dispute over the leadership of the critical Central Bank. They follow warnings by the United Nations of rising political instability and militia mobilization in the oil-rich North African country.

Front-month ICE Brent Futures rose 3% on the previous close on Aug. 26 due to supply risks from the impending Libya shutdown, closing at $81.43/b.

Eni said in its statement that "the majority of Eni's production in Libya is gas, located in the western part of the country and offshore," meaning the El-Feel closure would have an "extremely limited impact on Eni's overall production in the country.

Representatives of Libya's NOC and oil ministry did not respond to requests for comment.

Central Bank crisis

The shutdown was related to efforts by the internationally recognized Government of National Unity in Tripoli -- headed by prime minister Abdul Hamid al-Dbeiba -- to remove the head of Libya's Central Bank, Al-Siddiq al-Kabir, analysts said. The Central Bank is unified, despite Libya hosting separate governments in the east and west, and is the depository for oil revenues, which are the basis for an estimated 93% of government spending.

The Central Bank crisis showed no signs of abating Aug. 27, with a new board saying it had assumed the management duties of the bank, according to a statement on social media. Meanwhile, eastern warlord Khalifa Haftar -- who dominates the eastern government in Benghazi -- told a United Nations envoy on Aug. 26 that he opposed the "illegal" attempt to remove Kabir.

It comes as Libya's largest oilfield -- 300,000 b/d Sharara field -- is also offline, after the NOC declared force majeure Aug. 7. The shutdown was initially a reprisal for a European arrest warrant issued for the son of eastern warlord Khalifa Haftar, sources said, but has since morphed into a wider effort to exert pressure on Dbeiba's government.

Dbeiba and Kabir are erstwhile allies, but their relationship has soured in recent months, sources said.

The chaos threatens some 1 million b/d of Libyan light sweet crude exports, which head primarily to refineries in the Mediterranean and Northwest Europe. Analysts with Commodity Insights said the shutdown could support oil prices and could see barrels of WTI Midland crude redirected toward the Med.

Libya pumped 1.15 million b/d of oil in July, according to the Platts OPEC Survey from Commodity Insights, crowning a period of oil sector stability, which has been a rarity since the fall of Muammar Gaddafi in 2011. NOC has plans to reach 2 million b/d within five years.

The shutdowns illustrate the capacity for political disputes to disrupt oil and gas production in Libya, where the health of the sector depends on key actors including Dbeiba, Kabir, Haftar and the powerful NOC chief Farhat Bengdara.

Petchems impact

On the refining side, Libya's Rasco steam cracker in Ras Lanuf remained operational, a source at the company confirmed Aug. 27, although there were concerns that a prolonged continuation of disruptions upstream could hit petrochemical production.

The steam cracker -- which has ethylene, propylene and crude C4 capacities of 330,000 mt, 171,000 mt and 130,000 mt respectively -- started up in 2023 after being offline for over a decade due to damage sustained in the country's 2011 civil war.

Shipments of ethylene and propylene were scheduled to load in the first week of September, with some of the volume destined to Europe, market sources said.

Platts, part of S&P Global Commodity Insights, last assessed the three-to 30-day forward free-delivered Northwest European ethylene spot price at Eur891.50/mt ($994.53/mt) Aug. 23, up Eur14 from the previous week.