Home / Economy / The Closure of Oil Facilities will Incur Heavy Losses and Greater Challenges to Libyan Economy.

The Closure of Oil Facilities will Incur Heavy Losses and Greater Challenges to Libyan Economy.

 

In Libya, the oil sector is one of the most important sources of income to the state budget. However in the several years that have passed, the sector has faced a handful of challenges, including attacks by armed groups or other impacts from armed clashes, which have forced the repeated closure of the facilities. All of this has greatly affected the production of oil and the stability of the Libyan economy.

A Bad Year

In late 2013, the head of Libyan Petroleum Facilities Guard (PFG), Ibrahim Al-Jadhran, halted the export of oil from the ports located at Al-Helal oil conservation, which led to oil sales outside of the official market. And so the Libyan state has been living a difficult reality ever since. The State affairs and the day to day needs of citizens in Libya have been significantly impacted. Al-Jadhran’s efforts to shut down the ports for 3 years and blackmail state officials has prompted others in different parts of the country to follow suit.

Since September 18 2016, when control of Al-Helal oil ports was returned to the state, the National Oil Corporation (NOC) has been trying hard to restart the natural production of oil, but its efforts has been  colliding with new challenges and the repeated closure of oil installations.

On July 1, the industry exceeded its production of one million barrels per day, after three years of stagnation that did not exceed 360 thousand barrels per day. That was only after the restarting production at Al-Shararah and Al-Feel fields in the southern region, as well as the opening of the Rayanah link between the fields and the port of Al-Zawia after two years of closure.

Heavy Losses

According to its official website, the NOC estimated its losses due to the closure of oil fields and ports since late 2013 to May of this year to be about $130 billion. And as of August 30 of last year , the corporation announced a new loss of $160 million due to the closure by an armed group of Al-Rayanah valve linking Al-Sharara field with the port of Al-Zawiya, the link between Hamada and the port of Zawiya, and the closure of the control room at Al-Wafa field .

Also, since August 19 to December 7, an armed group closed the line between the industrial complex of Al-Malaita and Al-Ruwais electric station. This led to a partial halt to the production of the Al-Wafa field and the disruption of gas supplies from the coastline.

In early October, the NOC removed the status of force majeure on the export of sparkling ore from the port of Al-Zawya after the production stopped in the field two days after the closure by an armed group. The loss of production was estimated at more than $27 million.

The Suffering of State Institutions

On the other hand, the Central Bank of Libya stated that the deficit in revenues for this year amounted to about 6.5 billion dinars, which is largely due to the inability of the NOC to reach the expected production and export levels of 1.2 million barrels per day, as a result of security breaches.

On October 2, The Central Bank published on its official website a warning that on more than one occasion, the closure of fields and vital installations, caused the state losses of more than $160 billion, making the total actual revenue not even enough for state salaries.

The Central Bank explained that as a result of the budget deficit, the total advances granted to the Ministry of Finance “public debt” during the period (2014-2017) was about 70 billion dinars.

The hardships of the Central Bank continues with the security situation in the country, negatively affecting the lives of citizens and their basic needs. The shortage of liquidity, the high exchange rate of the dollar and the shortage of commodities and its infrastructure, in the midst of security and military institutions failing to offer security and control, one must ask: How will the state emerge from this crisis?

 

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