Since the overthrow of
Muammar Qaddafi in 2011,
Libya’s oil industry has become the target of
violent attacks and civil protests. The latest challenge is a
lack of electricity.
Production dropped 16 percent to 1.13 million barrels a day
last month, the lowest since January, according to data compiled
by Bloomberg. The decline is partly because power shortages are
disrupting the pumps that lift oil from beneath the ground, said
Abdel Jalil Mayuf, a spokesman for state-run Arabian Gulf Oil
Co., which pumps crude in eastern Libya.
Outlet pipes and fuel storage
tanks are seen at the Zawiya oil refinery near Tripoli, Libya.
Photographer: Shawn Baldwin/Bloomberg
May 31 (Bloomberg) --
Abdalla El-Badri, secretary general of the Organization of Petroleum
Exporting Countries, talks with Bloomberg's Ryan Chilcote in Vienna
about the impact of shale oil on medium and heavy crude exports, oil
demand and the outlook for his tenure. (Source: Bloomberg)
The oil and natural gas industry makes up more than 70
percent of Libya’s economy and generates almost all the state’s
revenue, according to the
International Monetary Fund. Falling
output is also a challenge for international companies including
Italy’s
Eni SpA (ENI), which gets more output from Libya, North
Africa’s largest producer, than any other country.
“The country has been through a tumultuous time,” said
Sana Abid, an oil analyst at KBC Energy Economics. “It looks
bleak for Libya at the moment. They are going to struggle and
that’s reflected in declining output.”
Austrian producer
OMV AG (OMV) said today its fields in Libya,
which produced 30,000 barrels a day last year, have been shut
since June 25 because of the political situation.
The Libyan government is trying to address the problems
facing oil producers, quadrupling the size of a special guard to
protect the industry from attacks to 12,000 people this year.
To ensure electricity supply, Libya signed a deal with
London-based contractor
APR Energy Plc (APR) to provide 450 megawatts
of power through mobile generators, the largest ever single
contract for temporary power supply.
Major Upgrading
“Stop-gap solutions are unlikely to be enough,” John
Hamilton, a director at U.K.-based consultant Cross-Border
Information, said in an interview in Tripoli. “Power generation
and a major upgrading of
power lines crossing hundreds of miles
of desert are essential to keep production at existing levels.”
Civil protests at
oil fields, where demonstrators have
demanded jobs and changes in the way oil revenue is distributed,
have cost Libya about 250,000 barrels a day in lost output, Oil
Minister Abdulbari Al-Arusi said last month. Production is now
30 percent below the post-revolution peak of 1.6 million barrels
a day reached last July.
Violence is also a risk. A shooting in June near Zueitina,
a city in eastern Libya with a major oil export terminal, left
an employee at power grid supplier
ABB Ltd. (ABBN) and a contractor
injured, according to state-run news agency LANA.
The Tripoli headquarters of the Defence Ministry Petroleum
Facilities Guard was stormed by militiamen from Zintan late last
month, leading to a gun battle in the streets of the capital
that left at least six people injured.
Security Problem
“There is a general security problem in the country,”
Total SA (FP) Chairman and Chief Executive Officer Christophe De Margerie said in an interview. “We have reduced our expatriate
staff a little so that in case of a big problem we can evacuate
more quickly.”
Demonstrations have been held at terminals in Tobruk and
Zueitina -- shut down at least four times since November -- and
at the Al-Fil oil field in the south, Al-Arusi said. Eni was
forced to halt gas exports to
Europe through its Greenstream
pipeline for a week this year.
An explosion in April at pipelines serving Zueitina also
heightened tensions after LANA reported it was a rocket-propelled grenade attack, citing an army officer. While the
state-run National Oil Corp. called it an accident, results from
an investigation haven’t been released.
“The way in which the Libyan institutions will settle down
is at the center of our attention,” Eni CEO Paolo Scaroni said
in an interview last month. “In principle, there are all the
reasons to get to a peaceful democracy.”
Saharan Wilderness
As well as holding back production, unrest makes some
companies wary of looking for new fields in a country with
Africa’s largest oil reserves. Explorers have become
particularly wary of exploring the wilderness of the Saharan
desert after an attack in January by al-Qaeda-linked militants
on the In Amenas gas plant in neighboring
Algeria left at least
38 foreign workers dead.
“Companies are extremely worried,” said Cross-Border’s
Hamilton. “BP said in 2012 they were going to resume
exploration in 2013, and here we are, there’s no sign of
resuming exploration. A company like BP right now couldn’t
commit hundreds of millions of dollars and send large numbers of
its employees into the desert.”
BP Plc (BP/) has pulled its foreign workers due to insecurity,
though the company remains operational with its Libyan staff,
according to a spokesman.
Worsening Relations
Thomas Schmidt, a spokesman for ABB, confirmed an incident
had taken place in Libya and he said the company has no plans to
leave for the moment. Neither does Total.
The biggest risk for the oil and gas industry may be the
worsening relations between the country’s two halves -- western
Libya, where the capital Tripoli is located, and the oil-producing regions in the east.
Many of the protests that disrupted oil production in the
east were led by federalists seeking a greater share of oil
revenue for the region, according to Arabian Oil’s Mayuf. The
east is also where U.S. Ambassador Chris Stevens and three
colleagues were killed in Benghazi in September.
“Libya’s oil industry is the football that all groups and
protagonists seek to kick around,” said Duncan Bullivant, CEO
of U.K.-based consulting company Henderson Risk.
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