Libya's oil woes set to worsen as fuel shortages loom

London — Libya's oil output graph over the past few years mirrors the oscilloscope readings of a patient on life support. And, things could get worse.

State-owned National Oil Corporation, or NOC, has warned that the lack of funds to import sufficient refined products "to serve the basic needs of Libyans" could result in fuel shortages.

The country's crude production has averaged as low as 110,000 b/d in the past week, less than a tenth of what it was producing before January 18, when the Libyan National Army, or LNA, orchestrated an oil port blockade.

NOC said in a statement that Libyan production averaged 114,331 b/d 109,000 b/d on March 8 and 7 respectively. Prior to January 18, production was as high as 1.22 million b/d, according to NOC.

This is the lowest level since September 2011, when a civil war tore the country apart and led to the downfall of Colonel Moammar Qadhafi, according to S&P Global Platts OPEC survey data.

The fall in production has cost the country and its National Oil Corporation more than $2.9 billion and there are concerns that the country might be on the brink of fuel shortages as the country's civil conflict intensifies.

Fuel shortages, imports rise

"NOC is concerned about a likely fuel shortage in the coming days after the forced reduction of local production, the Zawiya refinery shut down and the lack of funding to import sufficient fuel to serve the basic needs of Libyans," the state-run company added.

The company said for now it continues to supply hydrocarbons to all regions in sufficient quantities to meet the transport and domestic needs of citizens, but some fuel storage levels were running low and next week some areas may be at risk of facing shortages.

A month ago, NOC shut down its 120,000 b/d Zawiya refinery and warned it "could lead to potential shortages of fuel and huge costs" to the treasury, forcing it to import additional fuel to replace the refinery's production.

Imports of refined products like gasoil and gasoline have risen in the past month, according to sources.

But with less oil revenues coming in, there will be less money to import fuel, and this will put more pressure on the country's war-ravaged economy.

Most analysts expect Libyan supply disruptions to last for at least a few more weeks -- maybe months -- as a political agreement between the UN-backed Government of National Accord and the LNA looks unlikely.

The LNA, which is backed by Russia, UAE and other countries, and the UN-backed Government of National Accord (GNA), led by Prime Minister Fayez al-Serraj and supported by Turkey and Qatar, have clashed since April 2019, hitting the oil industry.

NOC has declared force majeure on exports from five key export terminals that were shut by the LNA, which controls Libya's oil and gas infrastructure but does not control sales and distribution of revenue.

The lack of storage capacity at Libya's oil fields and terminals is also one of the main reasons production has been shut since the blockade began.

Libya has Africa's largest proven reserves of oil, and its crude yields a large amount of middle distillates and gasoline, making it popular with refineries in the Mediterranean region and Northwest Europe.