By Chris Stephen
NOC’s plans to lift output are under threat after renewed fighting in the Sirte basin. After three months of peace, Libya’s oil war resumed on 7 December with fierce attacks on the country’s key oil ports, leaving questions over the future of an ambitious plan to keep lifting the country’s production.
Militias based at Waddan, held by the Tripoli-based Government of National Accord (GNA), drove eastwards towards Es-Sider, the country’s largest oil port, held by forces loyal to the rival government, the House of Representatives (HoR) based in the eastern town of Tobruk.
The fighting came three months after Tobruk’s Libyan National Army (LNA) commanded by powerful eastern general Khalifa Hafter seized the ports from the GNA, abruptly changing the country’s strategic balance – and allowing state company National Oil Corporation (NOC) to increase oil output.
Hafter’s forces have so far beaten off the attacks from militias. Air strikes by the LNA are thought to have killed almost 70 militiamen operating as part of a group connected to Tripoli’s Minister of Defence, Al-Mahdi al-Barghathi. The GNA has denied that it approved the assault to recapture Libya’s crucial oil assets, leaving a more worrying conclusion: that the Tripoli government’s authority has been shattered by a revived coalition of Islamists and anti-Hafter groups that are now operating independently of the GNA.
Since Hafter’s capture of the Sirte basin’s infrastructure, production has risen from less than 300,000 barrels a day in August to around 0.6m b/d now. NOC has targeted 0.9m b/d of output by the end of the year and 1.2m b/d in 2017. But both goals are hostage to political disruption and further conflict in the central oil crescent.
The ports of Es-Sider (447,000 b/d); Ras Lanuf (220,000 b/d and also Libya’s largest refinery) and Brega (51,000 b/d), all operated by NOC, plus Zueitina (200,000-b/d), a venture between NOC, Occidental and OMV, serve the Sirte basin. The basin is home to two-thirds of Libya’s pre-2011 production capacity of 1.6m b/d. Simply put, whichever government holds the Sirte basin, or oil crescent, has the trump card in a post-revolution civil conflict now that is entering its third year.
Extensive damage to Es-Sider’s and Ras Lanuf’s storage facilities – caused by Islamic State attacks and assaults by Islamist militias in 2014 and 2015 – have restricted export capacity from the ports to just 200,000 b/d, according to NOC. Since Hafter’s takeover of the infrastructure in September, the company has deployed technical teams to try to repair the facilities and other damaged infrastructure.
A GNA-allied militia, the Petroleum Facilities Guard (PFG), held the ports until September and in the summer had demanded a hefty fee before allowing them to operate. Hafter’s forces have made no such demand since capturing the facilities, and handed their control to NOC.
After the capture, The NOC lifted force majeure on the ports and they began operating for the first time since being closed in December 2014.
In early October the Sirte basin’s biggest producer, NOC’s Benghazi-based unit Arabian Gulf Oil Company (Agoco), increased output from the southeastern Sarir and Misla fields to 320,000 b/d.
Germany’s Wintershall also resumed output from its Concession 96 field, producing 35,000 b/d. Days later Waha Oil, owned by NOC and ConocoPhilips, Hess and Marathon Oil, began producing 50,000 b/d. By late November Libya’s production had more than doubled in four months to just shy of 0.6m b/d.
NOC chairman Mustafa Sanallah has since announced an ambitious plan to expand production to beyond 1m b/d. The plan, outlined on NOC’s website, proposes a $2.5bn investment in oil facilities to push production to 0.8m b/d, estimating it will generate annual export revenues of $16.6bn.
The plan says a further 340,000 b/d of production can be added if GNA and HoR forces agree peace in western Libya, allowing for the re-opening of pipelines from key southwestern fields Sharara (a joint venture between NOC and Spain’s Repsol) and El Feel (NOC and Italy’s Eni), raising total annual export revenue to $21.6bn.
This revenue is vital because two years of civil war have broken the economy. Most Libyans depend on state handouts, and central spending of about $25bn is mostly from foreign reserves which the UN says fell from $106bn in 2013 to $45bn by December. The Sanallah plan holds out hope of national economic survival.
But problems are in store. The crucial one is that although the GNA is backed by the UN and holds legal title to Libya’s oil income, the HoR and Hafter have physical control of the bulk of production. For the plan to work, the two governments need not just end their war but agree on revenue sharing.
And Sanallah has repeatedly cautioned that his plan depends on peace breaking out. That prospect all but vanished on 7 December with the latest attacks in the Sirte basin.
Many Libyans had been celebrating the previous day, after pro-GNA militias completed the capture of Sirte from Islamic State after a bitter six-month battle.
But as dawn broke, militias based at GNA-held Waddan, a large complex of military bases, drove northeast through the desert, capturing Bin Jawad, a town 30km from Es-Sider. A second thrust by more than 100 vehicles closed on Es-Sider itself, with workers reporting grad ground-to-ground rockets landing nearby.
Haftar’s response was swift. By mid-morning helicopter gunships were deployed to attack formations south of Es-Sider. Mig 21 jets bombed militias in Bin Jawad. Within hours, the attack dissolved – a Bin Jawad resident filmed the militias beating a hasty retreat after the bombing raids.
Confusion remains over who led the attack. GNA defence minister Barghathi issued a statement announcing the creation of a new force to capture the oil ports from Tobruk control, only for the GNA itself to insist it had no part in the operation.
The HoR in Tobruk, though, does blame the GNA, saying among prisoners captured after the abortive attack was a senior GNA military official. The attackers were composed of Islamist formations and units of the PFG. The PFG’s leader, Ibrahim Jadhran, and Barghathi have become major rivals of Hafter.
Despite reports of scores of casualties, the bulk of both armies remains intact – leaving them ready for fresh combat. Whatever part the GNA played in the offensive, the fighting may also have killed the already fading UN efforts to cajole the two governments into unity.
Sanallah evacuated all but NOC’s security and fire-fighting units from Es-Sider during the battle, but insisted that tanker loadings are continuing. “We condemn any actions that could further damage vital infrastructure. We have not declared force majeure on oil loadings,” said a statement on the NOC website on 7 December.
A big question is whether production can continue in the face of further fighting. Haftar’s forces launched further aerial attacks on Waddan on 8 December.
“If attackers are able to fire grad rockets into the terminals, the NOC may have to reimpose force majeure,” says John Hamilton, director of London-based Cross Border Information. “As soon as you’ve got rockets inside the terminals, tanker operators will say ‘no more ships’.”
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Petroleum Economist
