Libya’s Eastern Oil Ports Stay Shut, Constraining Crude Sales

Dec. 15 (Bloomberg) — A Libyan rebel leader refused to hand over control of three oil ports to the government, keeping a lid on the North African nation’s crude sales in a development that may buoy the price of the fuel.

“We failed in making our conditions implemented, so we confirm that we won’t open the oil ports,” Ibrahim Al Jedran told a televised news conference today. “We now officially mandate the Executive Office of the Cyrenaica Region to start what it has been tasked with and preserve this wealth,” he said, signaling that the eastern region known as Cyrenaica may sell oil without the government’s approval.

Brent crude futures, a price benchmark for more than half of the world’s oil, lost 2.5 percent last week and closed at $108.83 a barrel on Dec. 13 amid expectations that the terminals of Es Sider, Ras Lanuf and Zueitina, with a combined export capacity of 650,000 to 900,000 barrels a day, could reopen today. “If the ports don’t re-open, then prices may gain,” Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said today in an e-mail.

Crude output in Libya, which holds Africa’s largest proven oil reserves, fell to 210,000 barrels a day last month, the lowest level since the 2011 rebellion and NATO bombing campaign that ended Muammar Qaddafi’s 42-year rule. The country was producing an average of 1.55 million barrels a day in 2010, according to data compiled by Bloomberg, and had plans to increase production to 2 million barrels a day through increased exploration.

Nine Terminals

Libya is exporting about 110,000 barrels a day from five terminals under government control. A ninth terminal, Hariga in the east, is under partial government control.

Al Jedran, a former regional commander of the country’s Petroleum Facilities Guard whose men blockaded oil terminals starting July 28, said last week that a re-opening of the ports depended on three conditions. He demanded investigations into alleged illegal crude sales, the creation of an independent committee to monitor crude exports and additional development projects for eastern Libya.

Libyan Prime Minister Ali Zaidan said his government formed several committees to monitor the oil sales and “achieve better accuracy,” according to a published transcript of comments from Dec. 13 on the government’s Facebook page.

‘Controversial Point’

“I expect both sides to continue talking about the three conditions posed by Jedran, and eventually they will manage to reach a compromise, most likely by the end of the first quarter of 2014,” Riccardo Fabiani, a London-based analyst at Eurasia Group, said in an e-mail. “These negotiations are likely to prove challenging, as neither side wants to appear the loser, and the issue of oil revenue sharing is likely to be the most controversial point.”

Marathon Oil Corp., ConocoPhillips, Hess Corp, OMV AG and Occidental Petroleum Corp. are among the companies that would have benefited from a re-opening of the eastern terminals, which serve as export routes for the crude their Libyan units produce.

The central government is struggling to assert its authority against armed militias, while strikes and protests have forced sporadic halts at many oil facilities. Oil Minister Abdulbari Al Arusi last week said the drop in production has cost the country over $7 billion.

– Saleh Sarrar and Maher Chmaytelli, Copyright 2013 Bloomberg.