The Battle for Libya’s Oil Crescent
Energy Fact & Opinion
March 23, 2017
Fact:
- Libya’s key eastern oil ports of Es-Sider (340 thousands of barrels per day [kb/d]) and Ras Lanuf (220 kb/d) were recaptured March 14, 2017, by the Libyan National Army (LNA) led by Khaliifa Hafter, the general loyal to the eastern parliament based in Tobruk.
- The LNA had previously seized control of the ports in August 2016. However, earlier this month, the Benghazi Defense Brigades (BDB), an Islamist militia, successfully dislodged the LNA, until Hafter’s recent counteroffensive.
- On March 15, 2017, Libya’s government based in Tobruk issued a statement that withdrew its support for the reunification deal between the official arm of the National Oil Corporation (NOC) based in Tripoli and the faction of the NOC based in Bayda in the east.
- Following the recapture of Es-Sider and Ras Lanuf by the LNA, NOC chairman Mustafa Sanalla announced that the NOC is coordinating with the LNA to resume exports from the ports and added that he was not concerned by the rejection of the unity deal by the eastern NOC faction.
- UN resolutions stipulate that the NOC based in Tripoli is the only body with the authority to export oil from Libya. The legal authority question is not new, as evidenced by a failed attempt of eastern authorities last year to export oil, independently of the NOC based in Tripoli.
Opinion:
Libya’s crude oil output has been extremely volatile for the past five years. Last year alone, monthly production figures fluctuated within a range of 230 kb/d to 670 kb/d. While production was following an upward trend in the fourth quarter of 2016 and the first two months of 2017, the recent clashes in the oil crescent have caused a number of oil companies and service operators to reduce and in some cases completely halt production and operations in the region. As such, production levels since the start of March have fallen by approximately 80 kb/d, reducing output to 620 kb/d for the first three weeks before reaching 646 kb/d at the start of this week when some operations resumed.
Khaliifa Hafter will now ultimately decide whether exports will resume under the official NOC, and since he has cooperated with Chairman Sanalla in the past, it is likely that he will either ignore the House of Representatives call to end the unity deal or force them to reverse their decision. As such, in the immediate term, it is likely that export levels will rise back to the levels seen before the recent conflict. However, the important message that can be taken from these events is that production levels in Libya will remain unstable for the foreseeable future as political turmoil ensues.
In a bid to ensure greater stability in production levels Chairman Sanalla has called for a “neutral” Petroleum Forces Guard (PFG) under the management of the NOC to control the oil resources in the region. However, forming a neutral body in Libya is no easy feat, and for the moment, control of oil resources remains the primary object of the conflict, so it is very unlikely that the LNA will relinquish security of the ports to a PFG that is not loyal to Khaliifa Hafter. As such, any security force that is put in place to protect the oil assets will not be a neutral body, and so the threat of further conflict at Es-Sider and Ras Lanuf remains likely if the BDB or other militias decide to launch a counteroffensive against the ports.
In addition to the recent conflict at Es-Sider and Ras Lanuf, the eastern parliament voted to withdraw its support for the UN-backed agreement and the Government of National Accord earlier this month. As such, this move has at least for the moment ended any cooperation between the two sides to reach a political solution and to form a unified government, providing further signs of an unraveling political situation in an increasingly fractured Libya.
For more background information on the current geopolitical situation in Libya, listen to our podcast: Energy and Geopolitics Episode 1: Libya.
