Libya Crude Production Could Reach a Halt

Source: Bloomberg 3/20/2011, Location: Africa

Libya’s oil production fell to less than 400,000 barrels a day after foreign companies pulled out their staff, the chairman of the country’s state-run National Oil Corp., Shokri Ghanem, said in a televised media conference from Tripoli.

Ghanem said the North African country had no intention of breaking commitments with foreign companies and called on them to send their employees back to resume work. Libya may otherwise award new oil and gas concessions directly to companies in countries such as China, India and Brazil in order to raise production, which “could reach a halt,” he said.

Within hours of Ghanem’s remarks, war planes and naval vessels from the U.S., Canada, France, the U.K. and Italy began bombing Libyan air defenses and other military targets to enforce a United Nations-authorized no-fly zone. Earlier today, dictator Muammar Qaddafi abandoned a cease-fire he announced yesterday and ordered an attack on the rebel stronghold of Benghazi.

Oil and gas installations in Libya, including the main oil hub of Ras Lanuf, were damaged in fighting between rebels seeking the ouster of Qaddafi and forces loyal to him after mass protests against his four-decade rule erupted on Feb. 17.

Supply Drops

“We are continuing to monitor the situation,” Michaela Huber, a spokeswoman for Vienna-based OMV AG (OMV), said in an e-mail. Robert Wine, a spokesman for BP Plc (BP/), said the London-based company is also keeping an eye on events in the country.

Daily supply from Africa’s third-largest producer dropped by an estimated 195,000 barrels to 1.385 million barrels in February, from 1.58 million barrels the previous month, before slumping to a “trickle” by March 11, the Paris-based International Energy Agency said in its monthly Oil Market Report.

Oil fell yesterday after the Libyan regime said it would cease military operations and begin talks with the rebels. Crude for April delivery dropped 35 cents to settle at $101.07 a barrel on the New York Mercantile Exchange. Futures were up as much as 2.2 percent at $103.66 before the Libyan announcement.

Oil prices have risen by more than 10 percent in the past three months as unrest has spread across the Middle East, toppling the leaders of Tunisia and Egypt.


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