Violence will cripple Libyan oilfields for years

Opposition production stopped after regime's raid on oil Fields

Libya's oil industry, regardless of which side is in control of it, is currently suffering a massive skilled worker shortage.
Libya's oil industry, regardless of which side is in control of it, is currently suffering a massive skilled worker shortage.

IHS Senior Middle East Energy analyst Samuel Ciszuk on energy developments in the region:

While Libya's opposition movement this week was successful in—with the blessing of the international community—exporting its first independently sold crude cargo from the easternmost oil terminal of Marsa El-Harigh, it seems military forces loyal to long-time leader Muammar al-Qadhafi have been successful in moving into the easternmost rebel-controlled oil areas and launching raids to disrupt oil flows.

While the territorial control situation in the desert areas of Libya's prolific central and eastern Sirte Basin remains very fluid, it seems the Libyan regime-loyal armed forces have moved into the Waha area in the centre of the opposition-controlled part of the oil region over the last two weeks, establishing a foothold from which raids on surrounding oilfields and transport infrastructure can be mounted.

While production at most oilfields in Libya has been completely shut-in, or kept at just a trickle of normal flows, the rebel-controlled Arabian Gulf Oil Company (AGOCO), which used to be a subsidiary of Libya's National Oil Corp. (NOC), has tried to keep production flowing at least partially from two fields, the Sarir and Messla complexes, claiming that they have managed to keep production at around 100,000-120,000 b/d. Attacks this week have, however, cut off flows through the pipeline connecting the Sarir field with the Marsa El-Harigh terminal, while an attack, including a fire in at least one tank on the Messla field, destroyed some facilities there.

Some production or treatment installations have also reportedly been damaged at the Sarir field. In addition to this, government forces attacked the Amal 103 field operated by the Zueitina Oil Company in which the United States' midsize Occidental has a stake, although production at that field has been shut-in since soon after unrest started. At least three AGOCO workers have been killed in the attacks, with AGOCO's information manager, Abdeljalil Mayuf, telling Reuters that the oilfields only were lightly protected, saying "if we had defences, we wouldn't ask NATO. We don't have heavy guns or heavy equipment now", amid calls for NATO to more actively protect the oilfields and try to dislodge government troops from the area. He also added that AGOCO still had about 2 million barrels in storage at Marsa El-Harigh to sell. "The fields have been damaged and I think that all exports will be halted till these fields are repaired", Colonel Saleh al-Mansour, in charge of humanitarian affairs at the rebel-led National Transitional Council, clarified to Platts.

Significance: Libya's oil industry, regardless of which side is in control of it, is currently suffering a massive skilled worker shortage and it might be hard for AGOCO to quickly repair damaged facilities, especially with government forces on standby in the vicinity to carry out new raids.

Hitherto, the government has been careful not to cause permanent damage by torching oil wells or causing wellhead leaks and reservoir pressure falls, however, if fighting escalates in the oil areas, such care and precision might be impossible to maintain.

Certainly NATO would be wary to start bombing targets in the Waha field complex, where US companies ConocoPhillips, Marathon and Hess, hold large shares. On balance this does not bode well for the rebels' ability to maintain sustained crude exports.
 

About the author: Samuel Ciszuk is IHS Senior Middle East Energy analyst.

 

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