Libya’s top oil field re-opens again after gunmen closed it

(Bloomberg)—Libya’s biggest oil field began pumping once again after gunmen briefly shut it down, fresh proof of the challenge the conflict-ravaged North African country faces in reviving its energy industry from a five-month halt.

The Sharara field in southwestern Libya had stopped producing after armed men entered the site on Monday and told employees to end activities. The closing led the Tripoli-based National Oil Corp. to declare force majeure on loadings of crude from the field, the company said Tuesday in a statement.

However, workers were later allowed to resume operations at Sharara, according to people with knowledge of the situation. It wasn’t immediately clear how much crude the field was pumping.

The saga at Sharara put Libya’s unpredictability as an oil supplier on full display. The on-again, off-again status of production at the deposit threatens a nascent revival of exports from the country, which has produced little crude since January due to a civil war. Almost all its oil ports and fields are blockaded or closed as a result of the seesawing conflict.

“This criminal group dared to enter the field with heavy weapons,” NOC Chairman Mustafa Sanalla said in the statement. “Instead of defending the country’s interest and protecting civilians, the members of this armed group have directed weapons against our loyal Libyan workers, who are making tremendous efforts to try to prevent Libya from resorting to banks to borrow to feed its people.”

The NOC had only just lifted a force majeure on crude exports from Sharara on Sunday, as well as from the nearby El-Feel deposit the next day. At that time, Sharara was to start producing about 30,000 barrels a day, with a full ramp-up—to about ten times that amount—taking three months.

Sharara’s restart—if the NOC can keep the field producing—may signal better times in Libya. The country’s energy industry has been dogged for almost a decade by power struggles and fighting following the ouster of dictator Muammar Qaddafi in 2011.

For other oil producers, extra Libyan barrels would be less welcome, coming at a time when OPEC and allied producers are doing everything they can to keep supplies off the global market and boost prices. They agreed on Saturday to extend historic production cuts of almost 10 million barrels a day through July. Libya, with Africa’s largest oil reserves, is exempted from the restrictions due to its strife.

Brent crude was trading 0.9% lower at $40.42 a barrel at 2:17 p.m. in London. The benchmark is down 39% this year.

The NOC said earlier that El Feel would probably take two weeks to return to full capacity of around 100,000 barrels a day, due to damage caused by the shutdown there, the company said.

In mid-January, the NOC declared force majeure for exports of the Sharara grade of crude from Zawiya, a port near Tripoli. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control. The measure was applied to several ports.

The chaos at the country’s oil facilities came amid a military offensive by Khalifa Haftar, a commander based in eastern Libya, to conquer Tripoli in the west and consolidate his control over the country.

His supporters shut down most crude production in January, and exports plunged from 1.2 million barrels a day to some 90,000. The collapse has cost the oil-dependent nation billions of dollars in lost revenue.

However, forces loyal to United Nations-recognized Prime Minister Fayez al-Sarraj have gained ground in the past month, thanks largely to military support from Turkey. They pushed Haftar out of his last stronghold in the west last week.

Haftar has accepted an Egyptian-sponsored cease-fire, though Sarraj’s administration said government forces would try to retake the cities of Sirte and Jufra before entering political negotiations to end the war. Regaining Sirte would put them close to the so-called oil crescent, the area containing most of Libya’s oil reserves.

Haftar’s Libyan National Army has so far stymied the forces of al-Sarraj’s Government of National Accord near Sirte.

(Updates with field restarting from first paragraph.)

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