Zawiya Refinery Shutdown Triggers $95 Million in Losses for Libya's National Oil Company

Libya's National Oil Company announced that one of the refining units at its vital Zawiya site has been forced to shut down, driving financial losses to approximately $95 million over the week and raising concerns over broader economic damage.

According to a statement released by the state oil company on Saturday, the shutdown stems from the ongoing, forced closure of the valve for the Sharara crude transmission line. This action was initiated by armed groups associated with the Western South Oil Facilities Guard Agency and Western Military Zone.

As a result, the Tripoli-based NOC reported that lost crude production surpassed 942,000 barrels for the week, with daily losses peaking at nearly 260,000 barrels on Tuesday. The NOC stated that it "forcibly shut down one of the refining units at the Zawiya refinery to ensure the continued operation of the other unit for as long as possible."

As Libya's largest operating refinery, Zawiya boasts a refining capacity of 120,000 barrels per day and supplies petrol, diesel, jet fuel, liquefied petroleum gas, fuel oil, and naphtha for domestic use. The complex also features an asphalt and lubricants production center.

The facility is crucial for the nation's upstream operations as it connects to Sharara, one of Libya’s largest oilfields, via a pipeline that moves crude for domestic supply and international export. The company renewed warnings that the ongoing disruption will severely damage government finances and the wider economy.

"The continued disruption of crude oil flow through the main line ... will have a negative impact directly on the country's oil revenues, as well as double the import bill for petroleum products," the statement warned. As a precautionary measure, specialized teams have scheduled a crude oil shipment through a port to feed the refinery and protect electricity generation station supplies.

Libya has faced persistent challenges, including political instability and violence, following the 2011 overthrow of former leader Muammar Qaddafi. Much of the nation's oil production has stayed offline amid ongoing unrest.

Divided between two governments in Tripoli and Benghazi, the country features numerous influential armed groups that discourage investor financing. Despite holding Africa's largest and the world's 10th-largest proven oil reserves at nearly 48.4 million barrels, NOC chairman Masoud Suleman noted last month that Libya requires up to $40 billion in investment to expand its oil and gas sector and increase production.

Most of Libya's major oilfields and export terminals are located in eastern regions managed by forces under Field Marshal Khalifa Haftar, according to the Financial Times in August. Meanwhile, the UN-recognised Government of National Unity in the west relies on support from a coalition of armed groups.