Libya's biggest oil field restarts, adding hurdle to OPEC cuts

CAIRO and DUBAI (Bloomberg) -- Libya’s biggest oil field resumed production, adding another complication to OPEC’s effort to trim a global supply glut.

Sharara resumed production and is expected to reach 80,000 bbl in one day, according to people with knowledge of the matter who asked not to be identified because they aren’t authorized to speak to the media. Regular output will be fully restored in the coming days, now that the site has been re-secured after a three-month occupation at the site, state energy producer National Oil Co. said in a statement.

The field in southern Libya has a capacity of 300,000 bopd. It was shut down in December after guards and armed residents seized it over financial demands and was then taken over last month by forces loyal to eastern militia leader Khalifa Haftar.

The NOC “has received assurances that site security has been restored, verified by our own inspection team, enabling staff to return to work,” Chairman Mustafa Sanalla said in the statement, which urged that the oil company remain “free from extortion and armed incursion.”

The shutdown led to $1.8 billion in lost production, according to the statement.

The company officially lifted its declaration of force majeure, a legal status protecting the NOC from liability if it can’t fulfill a contract for reasons beyond its control. Plans are also in place to repair 20,000 bpd of production capacity destroyed by looting and vandalism during the blockade, according to the statement.

Oil rallied this year as the Organization of Petroleum Exporting Countries and allies agreed to reduce output by 1.2 MMbpd in the first half of 2019 to avert a supply glut. Libya was exempt from the cuts because of its internal turmoil but its oil production disruptions along with U.S. sanctions on OPEC members Venezuela and Iran restricted supplies further. The producers’ group will meet again in April to discuss whether to continue the supply reductions in the second half.