U.S. Markets closed

Must-know: Why the ports are vital for Libyan oil exports

Avik Chowdhury

Why resumed oil exports in Libya will benefit crude oil supply (Part 3 of 5)

(Continued from Part 2)

Why are the ports vital for Libyan oil exports?

During July and August of 2013, major oil loading ports in the eastern half of Libya were crippled by strikes led by the Petroleum Facilities Guard. This forced the complete or partial shut-in of oil fields linked to those ports. In August ,2013, the Zintan militia blocked and forced to shut down the pipelines transporting crude oil from two of the largest fields in the west Libya—El Sharara and El Feel. The fields restarted production in mid-September, but El Sharara was shut down again in late October because of demonstrations by a certain community. El Feel’s production was also shut down in November after protests by Berber activists at the Mellitah port blocked crude oil exports and the storage tanks were nearly full. El Feel’s production is expected to increase to normal levels because the blockade at Mellitah ended.

In order to save the national economy from accumulating loses from the locked down ports, negotiations began between the rebels and the Libyan government. Subsequently, in April, 2014, an agreement to reopen the Zueitina and Marsa al-Hariga oil ports was signed. The Zueitina port is located in the east of Marsa El Brega port of the Gulf of Sirte. It had a capacity of ~150 thousand barrels per day of oil exports in 2010. The Marsa al-Hariga port is controlled by the Arabian Gulf Oil Company (or AGOCO). The oil is supplied from the Messla and Sarir fields via pipeline to the port.

The following is a brief over of the Es Sider and Ras Lanuf ports, which have been closed since rebels seeking more autonomy took over the ports in August, 2013.

An overview of Es Sider and Ras Lanuf ports

The Es Sider terminal exported ~350 thousand barrels per day from the Waha consortium before to the fighting erupted in 2011. Es Sider is one of the largest terminals in Libya. The continuous clash between the opposition forces led to the port being damaged. It re-started operations in the early 2012, before the lock-down started in August, 2013.

Ras Lanuf is situated between the Es Sider and Marsa El Brega port in eastern Libya. Ras Lanuf is an important center for the petrochemical industry. The Ras Lanuf refinery has a crude oil refining capacity of 220 thousand barrels per day.

An improvement in the political situation in Libya would lead to higher production and export of crude oil from Libya to the rest of the world. Higher supply of oil can help reduce oil price, which would negatively affect oil producers like ExxonMobil Corporation (XOM), ConocoPhillips (COP), and EOG Resources Inc. (EOG). It’s important to note that most of these companies are components of energy exchange-traded funds (or ETFs) such as the Vanguard Energy ETF (VDE). However, this would be positive for oil producers who have active participation in oil production in Libya like Occidental Resources (or OXY), Statoil ASA (or STO), ConocoPhillips (COP), and Marathon Oil Corporation (or MRO). Some of these are components of the Energy Select Sector SPDR (XLE).

Continue to Part 4

Browse this series on Market Realist: