Market Shrugs At Libya’s Temporary Pipeline Shutdown

Libya’s energy sector faces significant disruptions as protests and the closure of vital infrastructure have rocked the nation’s oil and gas production. The gas pipeline connecting Libya to Italy was abruptly shut down at the Mellitah hub by a guard force, impacting the flow of natural gas to Italy.

The National Oil Corporation (NOC) has yet to provide official commentary on the situation, leaving stakeholders in suspense regarding the cause and potential ramifications of the shutdown.

Simultaneously, negotiations between the NOC and the chief of the guard force are underway, suggesting a possible connection between the ongoing talks and the seizure of the Mellitah hub.

Protests, primarily driven by wage disputes, have further crippled Libya’s energy sector. The Wafa oil field, responsible for a daily output of 40,000 to 45,000 barrels, has been forced to halt operations, with its production stored on-site due to the closure of a crucial valve.

Additionally, the closure of the Mellitah pipeline not only affects the flow of gas to Italy but also disrupts approximately 20% of Mellitah Oil & Gas Co.’s total gas output, exacerbating the economic impact of the disruptions.

The protests have spread beyond Mellitah, resulting in the closure of the El Feel field and the Al-Zawiya refinery. Should the demonstrations persist, there is a looming risk of a complete halt in projects, potentially triggering a force majeure event, as highlighted in a letter addressed to the government by a board member of the state-run NOC.

This latest disruption follows a recent force majeure declaration at Libya’s largest oil field, Sharara, highlighting the vulnerability of the nation’s energy infrastructure to socio-political unrest.

Operations resume

Following the temporary halt, oil fields in western Libya and the Greenstream gas link to Italy have resumed operations after the Petroleum Facilities Guard withdrew from the facilities. The withdrawal came after assurances from the Government of National Unity to address the guards’ demands, Bloomberg reports.

Shipments from the Wafa field have recommenced following Sunday’s halt prompted by demands for improved pay by guards stationed at the facilities.

Similarly, the Greenstream pipeline, vital for transporting natural gas to Italy, is once again operational. Bloomberg’s source, who preferred anonymity due to the sensitivity of the information, confirmed the pipeline’s return to service.

Prime Minister Abdul Hamid Dbeibeh took action on Sunday by signing a decision to revise the salaries of the Petroleum Facilities Guard. This move aligns with the salary plan outlined for security employees, addressing a key demand of the guards.

On Monday, WTI crude futures declined to approximately $76 per barrel, continuing the downtrend observed in the previous session. The prevailing uncertainties surrounding demand proved more influential than concerns regarding supply.

Information for this briefing was found via Bloomberg, Libya Update, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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