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Instability in Libya threatens oil industry

The West must stop ignoring the collapse of a country it helped break but forgot to help fix

Civil war had shut in Libya’s oil production. The International Energy Agency (IEA), aware that seasonal demand was rising and the market could spike in the absence of the country’s high-quality crude, acted quickly: over 30 days, 60 million barrels were made available from strategic stocks. The market used most of them and a damaging price surge was kept at bay. This was in the summer of 2011. Shortly after the IEA turned off the taps in September, Libya’s war ended and the country’s oil output began a swift recovery.

Almost four years to the day after the start of Libya’s 2011 revolution, civil conflict once again threatens to kill Libyan oil, destroying the country’s economy. In February, the sabotage of the pipeline linking the Sarir and Misla fields, in Libya’s east, to Tobruk, immediately shut in another 120,000 barrels a day (b/d) of supply, leaving total output beneath 200,000 b/d, insufficient even to cope with domestic demand, prompting imports of gasoline and other fuels. As Petroleum Economist went to press, the only cargoes of crude oil exports leaving the country held oil that had been stored in Hariga port, near Tobruk. 

The rise of light oil supply in the US since 2011 means that, for now, an over-supplied market does not crave missing Libyan barrels. In 2011, its oil production accounted for 1.6m b/d of 11.3m b/d light, sweet crude supply, points out Ed Morse, head of commodities research for Citigroup. Today that market’s size is 14.5m b/d. 

But this is no excuse for the international complacency that has left Libya on the brink of human and economic disaster. The country’s oil sector is close to total collapse, with little prospect of the speedy resurrection that followed the war in 2011. Since then, the deterioration of the country’s security has meant that little of the work necessary to maintain Libya’s production capacity was undertaken. Most of the international oil companies that could have carried out this work stayed away. Operators that remained kept only skeleton staffs.

Libya is in this plight partly because Western countries did nothing to help the rebels rebuild their country

Now things are even worse. Diplomats and investors are fleeing as Islamic State (IS) announces itself as a threat even graver than the political chaos that has left two rival governments vying for political control and two loose armed coalitions, tenuously representing the two political blocs, in bloody combat. IS’ January attack on Tripoli’s Corinthia hotel, home to many foreign investors and even the Tripoli-based prime minister, Omar Al-Hassi, announced the group’s arrival. Since then, it has expanded from its base in Derna, in the east, to take control of parts Sirte, in the central oil crescent. In early February, its terrorists struck the Total-operated Mabruk oilfield, killing 12 and destroying surface facilities. On 15 February, they beheaded 21 Egyptian Copts, prompting retaliatory air strikes by Egyptian F16s. In response to that, IS on 20 February detonated car bombs in Qubbah, a town close to Bayda, where Libya’s internationally recognised government sits. The slaughter killed 42. 

IS’ emergence worsens an already desperate situation. The conflict between Dawn, the militia alliance that controls Tripoli and installed the rump General National Congress (GNC) in government in the capital, and Dignity, the self-styled Libyan National Army, led by General Khalifa Haftar, that is grudgingly allied with the Tobruk-based House of Representatives (HoR) and Bayda-based government of prime minister Abdullah Al-Thinni, continues to rage.  

IS’ attack on the Mabruk field shows that a third force has joined the war for Libya’s oil. While Dawn and Dignity have fought for control of the assets, IS’ motivations are less clear. But the nature of the Mabruk attack and the sabotage of the Sarir-Tobruk pipeline suggests the group aims to cripple Libya’s commanding heights, not control them. Its ability to act with impunity even in Libya’s populated coastal is ominous for oil installations in more sparsely populated and less protected areas in the south. Unless the group is destroyed, it threatens to cripple Libya’s onshore oil industry. National Oil Company, the state firm, says the country’s production could now be shut in indefinitely. 

Events on the ground also threaten to overwhelm UN-led peace talks that aim to forge a unity government out of the two warring factions. These talks have yielded little, beyond exposing some of the splits within the two camps. The GNC initially refused to attend the negotiations. Several of its Islamist members still oppose them. Some leaders in Misrata, source of Dawn’s military power, have been more willing to talk, conscious of the war’s impact on commerce in the city. 

On the other side, Haftar, who has his own ambitions to rule Libya, has not been involved in negotiations and his army has continued to target “terrorists”, especially in Benghazi, despite earlier agreed ceasefires. Without his consent, it is difficult to see how the negotiators from the HoR could deliver any pledge to end the war. None of the men who met for UN talks in mid-February in Ghadames, where the two sides refused even to be in the same room, has full control over the militias. Any concessions made by the GNC, meanwhile, risk alienating the Islamist extremists with which it made tactical alliances. 

Nor will the talks deal with IS. That Libyan problem needs far more attention from the international community. Left to fester, Libya risks becoming the kind of failed state Saif al-Islam, Qaddhafi’s son, predicted in 2011.

Libya is in this plight partly because Western countries did nothing to help the rebels rebuild their country. This role was instead outsourced to other powers: Qatar and Turkey, whose vision for the new Libya as an Islamist, Muslim Brotherhood-led state has resulted in the GNC’s pseudo-government in Tripoli; and Egypt and the United Arab Emirates, who have backed Haftar and his wanton war on political Islam. It has been a disaster.

Unless they are willing to tolerate an ever-growing stream of refugees cross the Mediterranean; the establishment of IS base in North Africa; the economic and political collapse of Libya; and the crippling of one of the world’s most important oil suppliers, it is time for decisive international action. If the two factions cannot unite to deal with the growing terror problem – and there are few signs they can – the response should involve international peace-keeping forces to protect Libya’s people and secure its oil installations, and a commitment to rebuilding the country. Letting Libya rot and IS feed on its corpse cannot be an option.

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