Faith Nyasuguta
Libya is preparing to resume oil production after resolving a political standoff that had brought the country’s oil exports to a near standstill. The eastern government, which had ordered a halt to all oil production and exports in a dispute over the control of the central bank, has lifted the force majeure. The move will allow oil fields and export terminals to reopen, according to an official statement.
This latest development comes after the country’s rival governments reached an agreement on September 26 to appoint Naji Issa as the new central bank governor. The feud had erupted when Libya’s UN-recognized western government dismissed the former bank governor on August 19, sparking retaliation from forces aligned with eastern leader Khalifa Haftar. These forces shut down key oil fields and terminals on August 26, slashing the nation’s oil output by more than half.
The reopening of Libya’s largest oil field, Sharara, which produces 260,000 barrels per day, is expected to take place this week.
The shutdown of Sharara and other major oil fields had driven Libya’s oil production down from its usual 1.2 million barrels per day to less than 450,000 barrels in August.
Libya’s oil industry has long been at the center of the country’s political turmoil. Despite a 2020 UN-brokered ceasefire that ended large-scale hostilities, rival factions in the east and west have frequently clashed over control of the country’s most valuable resource. Control of oil revenues has often been a point of contention, as the Central Bank of Libya manages billions of dollars in energy income.
The recent oil shutdowns have caused disruptions to Libya’s exports, particularly to Europe, which has heightened global concerns. In the weeks following the shutdown, global oil prices briefly rose above $80 per barrel for Brent crude.
Earlier in the year, similar disruptions occurred when protests forced the closure of Sharara in January, prompting the National Oil Corporation (NOC) to declare force majeure. Production only resumed after two weeks of negotiations.
Libya’s oil sector has faced several unexpected disruptions. According to Claudia Gazzini, a senior analyst at the International Crisis Group, the latest shutdown was surprising because there had been relative peace on the ground, and both sides of the conflict had benefitted from the previous oil revenue-sharing agreement. She noted that oil-producing regions in the east are primarily controlled by forces loyal to Haftar, while the revenues are distributed by the Central Bank in Tripoli.
While the agreement to resume oil production raises hopes for a return to normal, industry analysts caution that the situation remains unstable. Gazzini has warned that the deep political divisions between Libya’s east and west mean that further disruptions could occur, and it remains unclear whether this latest agreement will hold in the long term.
The resumption of oil production is also expected to put downward pressure on global oil prices, which had risen due to escalating tensions in the Middle East. However, Libya’s history of political instability continues to cast doubt on the longevity of this latest arrangement.
This development follows other significant energy projects in Africa, such as Uganda receiving its first batch of line pipes for the East African Crude Oil Pipeline, highlighting the growing role of African oil in global markets.
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