Oil freeze threatens Libya with bankruptcy

Text by: RFI Follow

Libya's 2020 budget will be largely in deficit because of the blocking of the main oil sites which has lasted since January 18. Initiated by the supporters of Marshal Khalifa Haftar, this blockage prevents exports of black gold, the country's main source of income.

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With our correspondent in Tripoli, Mathieu Galtier

A time bomb. This is how specialists describe the forced cessation of activity in the oil crescent in the center of the Libyan coast. Production fell more than 85%. The national oil company said last week a shortfall of nearly $ 1.4 billion. The export of black gold is almost the only source of income for the Libyan state. And despite the country's division, this financial windfall continues to be redistributed throughout the territory, which has so far avoided a collapse in the living standards of Libyans.

For Pierre Terzian, director of the Institut Pétrostratégies, “ Libya now produces only 10 % of its normal production before the war. The current volume is barely enough to cover domestic needs - provided the refineries are working - and certainly not enough to fuel the economy because the oil sector was practically one of the few sectors to function since the collapse of the regime of Gaddafi . It fed the Central Bank which functioned thus and the sovereign fund . "

The Central Bank has warned that as early as March, civil servants' wages and subsidies on basic necessities could be cut if the crisis continues. Some oil fields have started to stop all activity because the storage tanks are full. This new phase is worrying because it takes months for a stationary field to start producing again at full capacity. And the more the machines are stopped, the greater the risk of machines breaking on restart, the petroleum engineers point out.

An economy threatened as a whole

In the end, these blockages, if they persist, will have repercussions on the economy and the finances of the country, explains Pierre Terzian: “ Today, production having fallen very low, if this continues thus, it is all that remains of the Libyan economy that will completely collapse. If oil revenues do not start to come in, we have to see if the State will draw on the reserves of the Central Bank, possibly on the sovereign fund. But if this is not the case, there will be a big liquidity crisis even more serious than what we have known until now. The economy will be completely down. "

In its recent press releases, the United Nations mission in Libya has also expressed great concern about the oil blockage which is aggravating the conflict in the country.

The national oil company does not rule out short-term production of 72,000 barrels per day. A collapse of 94% compared to normal production and more than half compared to current production.

► Read also: Libya: "the truce hangs by a thread", according to the UN

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