Libyan oil output at risk as Agoco threatens to halt operations - Living Environment

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Sunday, August 29, 2021

Libyan oil output at risk as Agoco threatens to halt operations


Production at some of Libya’s major eastern oil fields could be shut down in the days to come as the country’s budget crisis once again threatens to impact its oil sector.

Arabian Gulf Oil Co., a subsidiary of state-owned National Oil Corp., said Aug. 27 it will be suspending operations as it had accumulated large debts due to the failure to get adequate funds from the government.
Agoco, as the subsidiary is known, operates eight oil fields with a total capacity of around 280,000 b/d. These feed into key Libyan crude grade Sarir/Mesla, which is exported from the 250,000 b/d Marsa el-Hariga terminal.

“The company will not be able to continue working without the budgets and funds to operate, and will be forced to suspend all activities and businesses unless it is provided with the funds needed to operate production,” it said in a statement.

The lack of funds meant the company was unable to source “necessary spare parts, equipment, operating and production requirements to continue technical or service contractual obligations,” the statement said.

Budget crisis
Libyan crude production has recently been hovering near 1.2 million b/d amid relative political stability though some technical and maintenance issues have been persisting.

It is unlikely that the company would completely shut down all production at its fields, with some amount of crude and associated gas still needed to maintain power generation, a source close to the matter said.

But this incident once again reflects how the budget crisis could again start to impact the country’s production recovery.

Agoco resorted to similar measures in April this year, shutting almost all of its output, but production resumed after some funds were transferred to the company.

This even led NOC to briefly enforce force majeure on crude exports out of Marsa el-Hariga.

Platts Analytics expects some supply disruptions in Libya in the lead up to Dec. 24 elections, given internal volatility, a lack of consensus on election processes and little progress at UN-sponsored talks.

“Sporadic blockades remain the most likely outcome, but a full ceasefire breakdown and shutdown as in 2019-20 remains possible,” it said in a recent note.

“We forecast Libyan supply at 1.1 million b/d, 100,000 b/d below effective capacity, through year-end.”

Libya exports mainly light-sweet crude grades such as Es Sider, Sharara and Brega. Its main export markets are in southern Europe and China. The producer — which holds Africa’s largest reserves — is excluded from quotas limiting production by OPEC.

 

Source: S&P Global Platts

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