Libya’s largest operational oilfield, El Sharara, was shut down after a gun battle between rival militia earlier this week resulted in the wounding of 13 workers and the looting of equipment and cars from the site.
The oilfield, which is operated by Spain’s Repsol, is located in the remote south of the country and had been producing about 200,000 barrels per day, or more than a quarter of Libya’s total output before the incident.
News of the closure helped to support world oil prices on Wednesday, although they weakened again after reports that the field was likely to reopen soon and there did not appear to be an ongoing threat to staff or operations.
Ironically, the attack on the Repsol facility came on the same day that Repsol credited increased Libyan output for helping to boost its third quarter profit by 41 per cent.
Benchmark North Sea Brent crude futures were trading late in the day in London at US$82.53 a barrel, down $0.42, having been as high as $83.27 earlier.
Bloomberg News quoted Mansur Abdallah, an official at the Zawiya refinery and port, which is connected to El Sharara, as saying that the gunmen had come and gone and the field would soon reopen.
Libya has been riven by factional fighting since Muammar Qaddafi was removed three years ago. The ebb and flow of the conflict has been a factor in the world oil market over the past year, with initial worries that it could severely disrupt the country’s output, helping to push oil prices to their peak last summer, when Brent crude futures were above US$115 a barrel.
The unexpectedly rapid return of Libyan crude oil to the market during the summer, coupled with similarly resilient oil production in Iraq despite the advance of Islamist militants there, and a slowing of growth in a number of major economies, including China, has since pushed oil prices down by more than 30 per cent.
Still, Libya’s oil sector remains vulnerable, as the Sharara shutdown shows. Even before the latest disruption, the field had been running below capacity as some wells were lost owing to previous closures by local people protesting during the past year.
There were conflicting reports about which group was responsible for this week’s attack. The area has been the scene of fighting between the Tuareg and Tibu, tribes that have complained about neglect and discrimination. Tuareg protesters closed the field in October 2013, demanding more local council representation and national identity cards, which are needed to receive full rights and state benefits.
amcauley@thenational.ae
Follow The National's Business section on Twitter