Explainer: The shut-in of Zawiya could cost the oil industry dearly

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Hind Al Soulia - Riyadh - Libya, which has some of the cheapest, largely sweet oil in northern Africa, has seen much of its production remain offline during its bloody civil war

Dec 29, 2019

December 29, 2019

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Libya is considering yet again the closure of the Zawiya port on its western coast, taking precautionary measures to ensure the adjacent refinery - the country's largest - is not damaged. We take a look at why this development is critical for the North African state's oil industry.

What's the significance of the refinery?

The Zawiya refinery is Libya's largest, with a capacity of 120,000 barrels per day. The state-owned National Oil Corporation plans to double capacity at the facility to 250,000 bpd. The refinery is critical for processing crude from El Sharara field, the country's largest field, which has a production of around 300,000 bpd.

Why is the refinery likely to shutdown?

On Thursday, a missile nearly missed the refining facility. An attack on the refinery would have had a debilitating effect on the Libyan oil industry, which has struggled tp attract international oil companies and financing for new projects due to the security situation in the country. The El Sharara field, which only restarted production in August, is also being considered for a shutdown amid fierce clashes between various factions in the country.

What is the reason behind the latest round of clashes?

General Khalifa Haftar, who leads the Libyan National Army has been campaigning to take the capital Tripoli, which lies 40 kilometres to the east of Zawiya since April. The general handed over four large oil terminals including Ras Lanuf and Sidra which had been under blockade last year.

How has the conflict cost the Libyan oil industry?

Libya, which has some of the cheapest, largely sweet oil in northern Africa, has seen much of its production remain offline during the bloody civil war that erupted between rival factions following the downfall of Muammar Qaddafi in 2011. Production, which had remained at about 1.75 million bpd then fell by 850,000 bpd over the succeeding years as protests and blockades prevented export of crude via the country’s key port terminals. In an interview with The National in 2018, NOC chairman Mustafa Sanalla said the country needed $60 billion to develop its upstream and downstream sectors amid plans to raise its refining capacity to a million bpd.

Updated: December 30, 2019 04:57 AM

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