Draw a line 700 km south of Tripoli through the Libyan desert and you will discover something unexpected: a town replete with a massive swimming pool, airway landing strip and modern housing accommodations.
This isn’t a hidden resort. It’s the main facility for Libya’s largest oilfield called El Sharara.
The field can produce around 315,000 barrels per day.
But flows stopped soon after December 8 when tribesmen, armed protestors and state security guards wrestled control of Sharara from the Tripoli-based National Oil Corporation (NOC), demanding salary payments and development funds.
El Sharara Main Facility
Image credit: Google, DigitalGlobe
Oil flows from Sharara via pipeline to the coastal city of Zawiya where a refinery (120,000 b/d) is located along with an export terminal.
There is a pumping station (Hamada NC-8) roughly halfway along this journey to help keep the oil flowing.
More details on Sharara’s layout can be found here.
Sharara’s closure choked off supply to Zawiya causing inventories to fall. The amount of crude held in storage tanks at Zawiya fell by 45% over the two weeks that ended January 3, down to 2.3 million barrels, a low going back to September 2017, according to Ursa measurements (See Figure 1).
Zawiya stocks have remained low since then, but that could change soon if Sharara comes back online, as people expect.
Figure 1
Source: Ursa
Military forces loyal to a rival government based in Libya’s eastern city of Tobruk reportedly seized Sharara earlier this month.
Officials from the eastern Libya force turned control over to a security force, asking the NOC to reopen the oilfield. NOC said it would reopen Sharara once it conducts an inspection to verify that the area is safe for its workers.
The NOC’s foreign partners include Repsol, Total, OMV and Equinor.
These developments have raised hopes it won’t be long before Sharara resumes production.
The open/shut status has been a consistent pattern for Libyan oil infrastructure caught in the middle of civil strife. We’ve written about this topic before (See links here and here).
Image credit: Liam Cullen/Ursa
People in the oil market are closely following the news about El Sharara. The pending return of the field comes amid crude futures hitting 2019 highs this week.
When Sharara comes back online (assuming it does), might this additional supply kill the rally and send prices $5/b lower, back to the range where they had been stuck until last week?
The US State Department issued a statement February 14 asking parties to find a solution that can guarantee worker safety and allow Sharara to reopen.
Given its importance, we’re keeping a close eye on Sharara. We’re looking for signs of activity that could indicate production has resumed, by running daily analytics on our satellite data resources in addition to weekly inventory measurements.
We’ll keep everyone updated as this story develops.
