Dawn versus dignity: The struggle for Libya’s resources

NOC-LibyaDespite the chaos and conflict that is today’s Libya, the country’s National Oil Company attended the Mediterranean Offshore Conference & Exhibition in Ravenna, Italy where Stephen Williams was able to speak to various industry figures

Held in late March 2015, the 12th Mediterranean Offshore Conference & Exhibition had the theme: Planning the next 20 years, Diversifying Choices, Increasing Opportunities. But given the chaos and conflict that has descended on Libya, a key country of the Mediterranean oil and gas market, that seemed a very ambitious objective.

Since Muammar Ghaddafi fell from power, oil production has fallen from 1.7mb/d to barely 500,000, and many of the country’s main oil ports and terminals have closed or are non-operational. Intensified fighting between rival groups of militias is even threatening that output.

Libya possesses Africa’s largest proven reserves of oil and once exported most of its production to Europe, in particular to Italy but France and Spain were also major markets.

According to the International Monetary Fund, oil and natural gas accounted for more than 95 per cent of total government revenue and 98 per cent of export revenue in 2012, the first year of the post-Ghaddafi era.

But from mid-2013, when the call to declare the eastern region an autonomous territory became more vociferous, four out of the five terminals in the east where the country’s most prolific oil fields are found – Es Sidra, Ras Lanuf, Zueitina, and Marsa al-Hariga – were closed.

Some sort of compromise agreement was reached between the central government in Tripoli and the separatists in the East, with millions of dollars in compensation being paid to the separatists to allow oil exports to resume.

But the following year, the fragile balance of power collapsed, and two major rival factions, (and governments) emerged.

After militias fought over the capital Tripoli, in the process destroying the international airport, the newly elected and internationally recognised government that had been blocked from taking power from the outgoing General National Congress moved to Al

Baida near Tobruk in the East of the country, close to the Egyptian border.

Prime Minister Abdullah al-Thinni’s government, based in the East, has announced plans to both create a new payment system for the oil sector and an ‘alternative’ National Oil Corporation.
However, the established National Oil Corporation stayed put in Tripoli. A gentleman in Ravenna insisted to Oil Review Africa, “the NOC is non-political”. But their overseas partners, the oil companies working in Libya, began mothballing their operations and pulling their staff out of the country.

Total of France, Repsol of Spain and Marathon Oil of the US, have all suspended production. Only Italy’s Eni has continued to lift and export oil.

Super-major Eni is Italy’s largest company by market value, and the largest western producer in Africa. It produced 240,000b/d of oil equivalent, which includes gas production, in Libya last year and 300,000 a day in early 2015. It is still operating a pipeline from Melita, northwest Libya to Sicily that carries about 10 per cent of Italy’s natural gas supplies, but NOC has warned that force majeure could close the western Wafa gas field that supplies the natural gas.

Eni has announced that 2015’s first quarter world-wide production was up on the same period last year, with Libya accounting for part of the rise. Yet Eni’s chief executive, Claudio Descalzi, has cautioned that the situation in the war-torn country is worsening, and a strike has also hit the El Feel oilfield operated by Eni and the NOC.

Libya has proven natural gas reserves of almost 55 trillion cubic feet, making it the fifth-largest natural gas reserve holder in Africa.
In February, Italy warned that Libya was a ‘ticking time bomb’ and associated the rise of Islamic State terrorism to the power vacuum in the country, indirectly creating the criminal enterprises that are organising shiploads of would-be immigrants to make the perilous Mediterranean crossing in rickety boats.

Frequently, these crossings end in tragedy with hundred drowning in Mediterranean waters.

The UN-sponsored national dialogue peace attempt, that took place in Rabat, Morocco, failed to reach an agreement between the two major adversaries, the Baida government (Dignity) and Tripoli’s GNC (Dawn).

Meanwhile attacks, against oil and gas installations and foreign oil workers are increasing – with the pipeline that carries crude from Libya’s largest oil field Sarir to the Marsa Hariga terminal being bombed, causing the field to be shut down.

The rival governments battling one another for control of the hydrocarbons sector need the sector to be successful for the future viability of whoever wins, and the country itself will depend on it.

But now there are not only competing political groups in Libya fighting for control of Libya’s hydrocarbons sector, but the ISIS jihadis bent on destroying it. These are brutal extremists, guilty of numerous human-rights abuses, who view the industry as evidence of a foreign and corrupt alien presence.

Libya’s agony of conflict and increasing chaos appears to be increasing, and no end appears in sight. However, the work of the NOC and its presence at the Mediterranean Offshore Conference and Exhibition signals a brave non-political resolve to confront the challenges, and seek a peaceful resolution to the tragic situation that has befallen the country.

Stephen Williams

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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