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Libya plans refineries to stem dissent

Tripoli, November 2, 2013

Libya plans to build two oil refineries in its underdeveloped east and south, Prime Minister Ali Zeidan said, seeking to address grievances and protests which have shut down much of the north African country's oil output.

Oil production remained at a trickle after two western ports of Zawiya and Mellitah suspended exports this week, on top of the closures of most eastern facilities. Only one tanker was expected to load condensates in Mellitah, trading sources said.

Strikes and protests by militias, and minorities demanding more political rights or better pay have reduced Libya's exports to 90,000 barrels per day from its capacity of 1.25 million bpd.

The interim government has struggled to kick-start development and deliver on expectations of a higher living standard since Muammar Gaddafi's fall in 2011.

Zeidan told reporters the government planned a 300,000-bpd refinery in Tobruk in the east where protesters have blocked the Hariga port for around two months.

Another 50,000-bpd refinery would be set up in Ubari in the remote Fezzan where workers have shut down the El Sharara oilfield since the weekend. The desert area bordering Algeria, Chad and Niger has been neglected for decades.

Zeidan also said oil exports from the 110,000 bpd Hariga port would resume on Sunday or Monday.

But a source in the port said chances were only "low" that the port would reopen. "It seems the prime minister has a deal with some people in the council who don't represent the strikers," said the source. "The whole picture is unclear."

The government has announced several times the reopening of the port in Tobruk near the Egyptian border. The state National Oil Corp (NOC) declared force majeure on the port on September 12, after it had ceased to export crude oil for over two weeks.

There was no progress in resuming exports from other eastern ports. Brega, which is technically open, cannot export due to low oil output at nearby fields.

Production was at 20,000 bpd from Brega fields, a senior official of the state National Oil Corp (NOC) said, citing strikes as the reason for the production drop. Last week, local Libyan sources and traders said that flows had fallen due largely to electricity supply problems.

There was no sign that the southern El Sharara oilfield, which supplies the Zawiya terminal with crude, had resumed.

Several market sources said the Makronissos tanker, chartered by Trafigura and next in line, had been given instructions to berth at the Mellitah terminal to load condensate after protesters at the port gave permission.

Traders said it was not yet clear whether more vessels would call on the port.

"We believe that a resumption of the production and exports at the Sharara oilfield and the Mellitah port is likely to require weeks, due to the political nature of this protest by non-Arab minority groups," Riccardo Fabbiani, North Africa analyst at Eurasia Group consultancy, said in a note.

Italian oil and gas group Eni said it expected its 2013 output to be lower than in 2012 due to Libyan and Nigerian disruptions. The company is the largest foreign major in Libya through Mellitah Oil and Gas, a joint venture with NOC.

Before the 2011 civil war, the venture produced around 270,000 barrels of oil equivalent per day of natural gas and crude oil, most of it for export.

US-based producer Hess meanwhile reported a lower-than-expected third-quarter profit due to Libyan unrest.

The company is one of three stakeholders in the Waha Oil Co in eastern Libya, which had produced 320,000 to 340,000 bpd of its main export grade Es Sider.-Reuters




Tags: Refinery | libya |

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