Libya’s state-owned National Oil Corporation (NOC) declared force majeure Monday on its largest oil field, El Sharara, due to security concerns.
Over the last two days, NOC declared force majeure on other major oil fields as well, after protesters stormed the facilities and shut down production. On Wednesday, NOC also declared force majeure on the eastern oil port of Brega, “because it is impossible to implement its commitments toward the oil market” following a wave of crude production closure there, the company said.
Force majeure is a common clause in contracts that frees both parties from liability or obligation when an extraordinary event or circumstance beyond their control prevents one or both from fulfilling their obligations.
Libya had been producing 1.2 million barrels of crude oil per day, according to government statistics. El Sharara has a capacity of close to 300,000 barrels a day.
“A group of individuals put pressure on workers in El Sharara which forced them to gradually shut down production and made it impossible for NOC to implement its contractual obligations,” NOC said.
Rihannon Phillips, an intelligence analyst at the Sibylline risk consultancy firm who focuses on developments in the Middle East and North Africa, told The Media Line it is unclear who exactly was responsible for the shutdown of the oil fields.
However, she added, “oil and gas facilities are often targeted by militant groups and competing factions as they seek maximum disruption to strengthen their political leverage.”
Since the fall of dictator Moammar Gadhafi in 2011, Libya has been fragmented by civil war and political instability.
This has resulted in two competing governments, each supported by various factions: An internationally recognized in the country’s more populous west, and another in the oil and gas-rich east, both supported openly and privately by various players in the international arena.
In February, the eastern government named an interim prime minister, Fathi Bashagha, claiming that the mandate of Prime Minister Abdul Hamid Dbeibeh had expired. However, Dbeibeh rejected Bashagha’s appointment, saying he will only hand power after a national election.
Reda Daab, managing director for Libya and the Maghreb at Norwegian Oil and Energy Solutions, told The Media Line El Sharara was closed by supporters of Bashagha and of Khalifa Haftar, commander of the Libyan National Army that is loyal to that part of the Libyan House of Representatives that meets in the eastern city of Tobruk, because of the failure to hand over power to the new government.
Haitham Younes, a Libyan governance and public administration expert, told The Media Line this is not the first time that something like this has happened in the country.
“This became a standard technique to pressure authorities. It has been used by local communities, militias, and political groups, for different political agendas,” he said.
Phillips noted, “The closures are crucially occurring at a time when Libya should be benefitting and exploiting a growing international demand for crude oil considering the Ukraine conflict, with the country unable to benefit from this.”
Daab added that as long as there is political instability in Libya, the country will only be hurt by the economic consequences of the Russo-Ukrainian War.
“In light of the current Ukrainian crisis and its effect on commodities prices, this would worsen the economic situation in Libya. Libya could be a viable substitute source for Russian oil and gas supply to Europe, elevating Libya’s geopolitical status, but this requires sustainable political stability,” he said.
Daab described the cessation of oil exports as a “disaster in the true sense of the word.”
He believes that Libya’s western, Tripoli-based Government of National Unity has returned the country to a state of polarization and conflict.
Younes thinks this will mainly affect the country’s economic situation, putting more pressure on the already suffering population.
Phillips agrees. “It will inevitably damage the country’s economic output and prosperity, compounded by the fact that the country is still reeling from the fallouts associated with the COVID-19 pandemic,” she said.
She also discussed other implications of decreased oil production for Libya.
Phillips said that increased competition by factions for resources will deepen and entrench political divisions, exacerbating power struggles between the parallel institutions.
Furthermore, she continued, “fluctuations in oil production and the permanent closure of some facilities will have considerable knock-on effects on the country’s electricity production as well as wider power facilities in-country, as they mainly rely on domestic oil and gas output.”
Still, she is skeptical that all this will force Dbeibeh to resign. Furthermore, “his support from the UN-led representatives and several neighboring countries bolsters his self-proclaimed legitimacy,” Phillips said, adding that he met on Monday with President Abdelmadjid Tebboune in Algeria.
Nevertheless, Younes said it could “significantly affect his [Dbeibeh’s] ability to round up militias’ support, weakening his ability to cling to power.”
The ideal solution would be a political settlement reached by the competing governments, supported by the international community pressuring both parties to adhere to a peaceful political process, Younes said.