Another Libyan Oil Firm Cuts Output as Funding Row Worsens

One of Libya’s state oil producers said it would have to cut as much as 100,000 barrels a day of output this week, a further sign that a budgetary crisis is threatening the OPEC member’s energy industry.

Sirte Oil Co. will be forced to “reduce production and halt it completely within 72 hours,” the company said in a statement Thursday to its parent, the National Oil Corp.

The eastern-based firm blamed its “very critical financial situation, the inability to fulfill contractual obligations to contractors, accumulation of debts and the lack of spare parts, fuel and chemicals required for operations.”

The government decided on Wednesday to transfer 1.05 billion dinars ($234 million) to the NOC, Oil Minister Mohamed Oun said in a response to questions from Bloomberg. While that may ease some of the problems, it’s still less than what the sector was meant to have been allocated by now following the signing of budget last month.

Sirte Oil is the second Libyan company that’s had to slow production in the past week because of a lack of funding to maintain fields and pipelines. Arabian Gulf Oil Co. cut output by roughly 90%, or 280,000 barrels a day.

The NOC on Monday suspended exports from the key eastern port of Hariga, citing the central bank’s failure to release money to the energy sector.

The disruptions have caused Libya’s overall crude output to fall below 1 million barrels a day for the first time in months.

The budget dispute risks derailing Libya’s oil recovery following a truce in the nation’s civil war around mid-2020. Crude output surged from almost nothing from September and reached 1.25 million barrels a day last month, the highest level in eight years.

The United Nations, which is overseeing political talks in Libya, is concerned by “indications that other shutdowns may be imminent,” it said in a statement Thursday.

“Libya is only now emerging from a very costly conflict, and there are multiple urgent needs that need to be addressed to improve the quality of life of Libyans,” it said.

©2021 Bloomberg L.P.

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