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Violent clashes between armed groups near oil facilities in Libya are causing more concern for the country’s energy sector, which has been unable to trade oil for months. They come less than one week after the National Oil Corporation (NOC), Libya’s state-owned oil company declared force majeure on oil exports for the second time in six months because Libyan National Army (LNA) forces were occupying oil ports and fields across the country, sealing off production and trade routes.

The attacks are deeply concerning and are jeopardising oil facilities and threatening the safety of workers, says NOC in a statement. It alleges that the conflict in the Brega region is between groups Al-Saiqa and the Petroleum Facilities Guard (PFG), both of which belong to Khalifa Haftar, general of the LNA.

The violence follows a deteriorating situation for Libya’s oil sector which has now become the centrepiece of the country’s political troubles. Roiled in conflict since the 2011 uprising that led to the toppling of dictator Muammar Gaddafi, Libya is now split between two rival administrations battling for power: the United Nations (UN)-backed Government of National Accord (GNA) based in Tripoli and the eastern-based House of Representatives allied with Haftar and the LNA.

NOC first declared force majeure, a legal clause that protects a party if it is unable to fulfil a contract for reasons beyond its control, in mid-January after the LNA blockaded oil exports from the ports of Brega, Ras Lanuf, Hariga, Zueitina and Sidra. It did so again on July 12, alleging that instructions to shut down production came from the United Arab Emirates, a close ally of LNA. NOC called for the states responsible to be held to account by the United Nations Security Council, adding that it condemns the renewed blockade on Libyan oil exports, which is costing US$55mn a day in lost production.

“This is gravely disappointing, especially following repeated statements by very senior representatives of the UAE last week in support of international efforts to restart oil production in Libya,” reads a statement by NOC on July 12.

In fact, Libyan oil exports had only restarted a few days prior on July 10 with the loading of the oil tanker Kriti Bastion at the port of Es Sider after the six-month shutdown.

Parties had seemingly reached an agreement for the re-opening of terminals and restart of oil production, which had plummeted to below 100,000 barrels per day (bpd) compared to 1.2 million bpd before the blockade. However, Haftar’s forces ordered a halt to further exports on July 11, reversing any negotiations made.

Shipments will be prohibited until the sides at war agree to allocate money from oil more fairly and to audit the Tripoli-based central bank, which manages energy revenue, an LNA spokesperson says in a statement.

NOC reports that Russian and Syrian mercenaries fighting alongside the LNA now occupy the port of Es Sider, with others camped within the vicinity of the El Sharara oil field – Libya’s largest – preventing oil from flowing.

 

Ageing infrastructure hit

A blockade of this length has harmed Libya’s oil sector, with the shutdowns and lack of maintenance damaging fields and wells.

“When it comes to oil and gas infrastructure in Libya, most of it is slower and quite old,” says analyst, oil markets and E&P (exploration and production) at Rystad Energy, an energy consultancy firm. “As these measures are extended, the impact on the ageing oil infrastructure is going to increase,” he tells GTR. “After force majeure measures of around five to six months, the impact on infrastructure has already been significant, particularly on the fields which are operated by Akakus Oil in the Western parts of Libya, El Sharara for example.

“After this outage, it’s going to take four to five months, or possibly even more than that, and a significant capital expenditure, to bring fields back to their previous capacity.”

Libya is the most oil-rich country on the African continent, touting an estimated 48 billion barrels of oil in reserves. It is highly dependent on this resource economically; in 2018, the oil sector accounted for around 69% of export earnings and the oil and gas industry made up 60% of total GDP, according to the Organization of the Petroleum Exporting Countries (OPEC).

Amid an increasingly unstable political climate, Bhushan says it is unlikely that production will start before September. “GNA is commencing an advance towards the eastern oil fields so there is likely to be violence in that region. The UN is trying to mediate a ceasefire between them, but it hasn’t really been successful so far.”

Indeed, when force majeure was declared for the second time, NOC chair Mustafa Sanalla was not optimistic about the outcome of the efforts being made. “We appreciate greatly the efforts of the United Nations, and the US to restart Libyan oil production and avert an escalation in the conflict. If these efforts fail, as it appears they will, there must be consequences for the actions of the handful of states that are undermining the rule-based international order and destroying Libya.”

As more countries interfere and additional troops are sent to Libya, the conflict deepens, making it increasingly challenging for negotiations to be made.

Turkey has come to the aid of the GNA, sending in troops in January. For Turkey, it is advantageous to prevent the LNA gaining control of Libya as it signed deals relating to maritime borders and enhanced security co-operation between Ankara and the GNA at the end of last year. “There’s very little chance of any peace at any of these sites because Turkey is not going to back out and LNA will not retreat because Turkey won’t,” says Bhushan.

LNA ally Egypt is also making preparations to send in soldiers. On July 20, its government authorised the deployment of troops outside of the country, paving the way for military intervention in neighbouring Libya.