As battle lines were drawn during Libya’s long civil war, Libya’s National Oil Company (NOC) was split between East and West, with opposing governments in Tripoli and Torbruk competing over oil revenues. Libya holds Africa’s largest proven reserves of crude, however, ongoing conflict has seriously disrupted oil production and exports – Libya currently produces just 350,000 barrels per day (b/d), significantly below the 1.65 million b/d produced prior to the unrest.
With oil revenues a key source of income, attacks on oil installations have been frequent by rival groups vying for power. A statement on July 2nd – announcing the reunification of the NOC – could indicate that recovery in the Libyan oil sector is on the horizon. An NOC spokesman, Mohamed Elharari, stated that reopening the blockaded export terminals at Es Sider, Ras Lanuf, Zawiya and Zueitina was a top priority for the company. The four ports have a total export capacity of 860,000 b/d, and would significantly boost global crude supplies. Any improvement to the situation could have a substantial impact on global markets – the opening of these terminals would likely lead to downward pressure on oil prices.
However, years of war have ravaged Libya’s oil infrastructure, the lack of maintenance represents a significant barrier to increased production in the near term. Both Es Sider and Ras Lanuf have been the focus of attacks, with Ras Lanuf’s storage tanks particularly badly damaged. Key to restarting exports will be Ibrahim Jathran, head of the Petroleum Facilities Guard (PFG) – who have been blockading Libya’s export terminals since 2013. Initially set up as a politically neutral force to protect Libya’s oil facilities during the civil war, the group have arguably acted as a private militia under Jathran’s leadership. A deal between Jathran and the Tripoli-based government on the 25th July was condemned by the chairman of the NOC, Mustafa Sanalla, who stated that the deal set a “terrible precedent” for further extortion by armed groups controlling oil facilities.
As the disagreements continue, it is clear without the support of the NOC, the prospect of ports reopening remains unlikely.
The reunification of Libya’s NOC is certainly a positive step for recovery, however, tremendous barriers remain – in the short to medium term, oil is unlikely to flow at the levels seen in the days of Gaddafi.
Joel Hancock, Douglas-Westwood London
+44 (0)1795 594737 or [email protected]