Libya Reopening Oil Ports After Taking Control From Rebels

Jul 03, 2014 11:02 am ET

(Updates with National Oil Corp. comment in third paragraph.)

July 3 (Bloomberg) -- Libya is ready to reopen two oil ports in the country’s east and will resume exports as fast as possible after taking back control from rebels who blocked crude shipments for the past year.

Es Sider and Ras Lanuf, which have combined capacity of 560,000 barrels a day, will open after an agreement was reached with rebels, Ahmed al-Amin, a government spokesman, said by phone. The nation’s biggest and third-largest export facilities were handed over in a gesture of support for the newly elected parliament, a spokesman of the rebel group that calls itself the Executive Office for Barqa said yesterday.

“Exports will resume at full capacity, as much as we can,” Mohamed Elharari, spokesman for the state-run National Oil Corp., said by phone from Tripoli. “Loading will resume as soon as possible, we will be speaking with the international companies” about crude sales, he said.

Libya has become the smallest producer in the Organization of Petroleum Exporting Countries in the past year because of unrest in the country. It is currently pumping at a rate of 320,000 barrels a day, Elharari said. That’s less than a third of the level in June 2013, according to data compiled by Bloomberg. The reopening of the two terminals could raise the nation’s crude-export capacity almost five-fold.

“We’re ready to lift force majeure, we’re waiting for a notice from the government,” Elharari said. Force majeure is a legal step that protects a company from liability when it can’t fulfill a contract for reasons beyond its control.

Brent Contango

Brent crude prices declined for a fourth day on expectations that Libya will boost supply. Brent for August settlement decreased as much as 71 cents, or 0.6 percent, to $110.53 a barrel on the London-based ICE Futures Europe exchange.

Front-month Brent crude futures traded at a discount to the second month, marking the first appearance since April of a condition known as contango, which typically indicates that immediate supplies exceed demand.

“The market is weakening in reaction to the Libyan news, as it has on previous announcements,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. “For the move in prices and curve structure to hold, you would need a rapid follow-through in terms of actions to resume oil exports.”

Consulting OPEC

Libya will consult with OPEC on how the group can accommodate the North African country’s rising production within its 30-million-barrel daily production target, Elharari said. OPEC produced 30.2 million barrels a day in June, according to data compiled by Bloomberg.

Rebels of the self-declared Executive Office for Barqa are seeking self-rule for the eastern region of the country known also as Cyrenaica. They occupied the ports in the region at the end of July 2013, demanding an oil-revenue-sharing agreement to make up for the neglect the area experienced under Muammar Qaddafi’s 42-year rule.

Es Sider has 340,000 barrels in daily loading capacity and Ras Lanuf 220,000 barrels, according to the Oil Ministry. The nation has a total of nine export terminals, of which three -- Brega, Jurf and Bouri -- are operating with a combined daily loading capacity of 145,000 barrels.

The government has agreed to pay “in the next few days” salaries of Petroleum Facilities Guard members who defected to the Barqa group during the blockade and to implement a preliminary agreement reached on April 6, Ali Al-Hasy, a rebel spokesman, said yesterday. The Barqa group handed over the oil ports of Hariga and Zueitina after that accord in exchange for amnesty and salary payments for the guards, as well as an audit of the National Oil Corp.’s oil sales since the overthrow of Qaddafi.

--With assistance from Grant Smith in London and Maher Chmaytelli in Dubai.