Libya oil chief warns output to drop every day as ports halted

CAIRO (Bloomberg) -- Libya’s oil output will keep dropping day by day if major ports remain closed after clashes last month led to a political deadlock, the head of the country’s state energy producer said.

“Today, production is 527,000 bpd, tomorrow it will be lower, and after tomorrow it will be even lower and everyday it will keep falling,” Mustafa Sanalla, chairman of the Tripoli-based National Oil, said in a video statement posted on the company’s Facebook page. The nation was producing more than twice that amount before fighting in February forced an oil field in western Libya to shut down, he said.

Sanalla urged Khalifa Haftar, an army commander in the politically divided nation’s east, to transfer control of the closed oil ports to the NOC in Tripoli.

Haftar’s forces gave control of the ports to a separate oil authority in the eastern city of Benghazi, after recapturing them from a rival militia. The U.S., UK, France and Italy expressed concern about this transfer to an entity other than the NOC. The surprise handover led to a halt in shipments from the ports of some 850,000 bpd. Libya’s instability in complicating OPEC’s effort to pump more crude as well as United Nations-backed efforts to hold elections this year.

Frustrated Libyans

Haftar’s forces said their army was not receiving payments for protecting oil facilities. Sanalla said in the video statement that crude revenue is sent to the central bank and that the NOC isn’t responsible for how it gets distributed.

“I understand Haftar’s feeling,” Sanalla said. “He must be frustrated like most Libyans, but do we express this disappointment by halting exports? I don’t think this is right. We all agree that the situation is not right, that national wealth is not utilized to its best.”

While Libya holds Africa’s largest oil reserves, years of conflict among armed groups competing for influence over its energy riches have hobbled production and exports since a 2011 revolt led to the ouster and death of former strongman Moammar Al Qaddafi. The economy’s decay economy has stoked anger in eastern Libya over a perceived misuse of funds and a view that that too much wealth is concentrated in the west

“We hope that the army leadership will hand over the ports to keep oil production going, and any other discussion can be held with the government, the central bank, the house of representatives,” Sanalla said. “If you hand over the ports to us, this will be an act of courage and nobility because no one wins in this battle, we all lose.”

Libya was pumping about 1.3 MMbopd in February before militias closed the western 80,000 bpd Elephant, or El-Feel, field in February, Sanalla said. Output will continue to decline if the five ports recaptured by Haftar stay closed, he said. Oil facilities in the Gulf of Sirte along the central coast are old and in poor condition, and only four of 13 storage tanks at the port of Ras Lanuf are currently operational, he said.

“Let’s keep oil out of politics, especially at these difficult times,” Sanalla said. “We are appealing to everyone’s national spirit, keep oil facilities out of the conflict."