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Eastern forces expand Libyan energy sector grip

Warlord Khalifa Haftar has captured the country's largest oil field, putting a new question mark over the fragile oil recovery

The capture of the southern Sharara field, a 315,000bl/d joint venture between the National Oil Corporation (NOC) and Spain's Repsol, gives Haftar control of the bulk of Libya's oil fields, with his Libyan National Army (LNA) already master of the eastern Sirte Basin, home to two-thirds of total production.

The LNA, based in east Libya, has many times tried to seize the south, seeing it as a springboard to its long-promised offensive on Tripoli to topple its UN-backed government. Success appears to have come after the largest local tribe, al-Sulaimen, defected to its side.

No damage was done to the Sharara facilities in what was a bloodless capture following operations to take nearby airfields and the regional capital, Sabha. Fighting continues in the region though, with air strikes hitting militias near the LNA's other target, the 72,000bl/d El Feel field, run by the NOC and Eni.

Haftar has yet to announce his policy, amid speculation he will revive a plan to switch control of Libya's oil infrastructure from NOC to a parallel body operated by the eastern government based in Tobruk. He put the plan into action last June, after the LNA repelled an attack on the Sirte Basin oil ports by west Libyan militia leader Ibrahim Jathran. After fighting that killed 31 LNA fighters and an unknown number of militiamen, Haftar declared the ports under Tobruk's control. NOC reacted by shutting the ports, and production plummeted by 800,000bl/d.

That crisis was defused after Tobruk failed to find buyers for the oil willing to break UN Security Council resolutions mandating NOC as Libya's sole authority. And, reportedly, when the Trump administration, wanting to keep world oil prices down, made a rare diplomatic foray into Libyan politics, urging Haftar to return the ports to NOC control.

NOC could benefit

Haftar's campaign against the militias has powerful support in eastern Libya, amid popular anger that oil receipts are diverted to the militias, which periodically raid the oil terminals.

But Haftar's capture of Sharara could actually benefit NOC. The field has been shut since December after the militia guarding it rebelled and seized the facilities, attacking staff and ransacking facilities. NOC has refused their demands for hefty payments and oil officials will welcome Haftar's intervention — if he permits them to turn on the taps.

NOC chairman Mustafa Sanallah insists he has no problem with Haftar if production resumes, condemning the Petroleum Facilities Guard (PFG), who had occupied the field. "What we have now is almost a tribal PFG, this is not good, we have to have a national PFG."

Haftar is likely to find little international support if he again attempts to switch Libya's oil facilities to eastern control. Less clear is whether he will use his capture of the south to launch an offensive on Tripoli.

The city is held by powerful militias who fight periodic battles with each other. Despite UN recognition, Tripoli's Government of National Accord (GNA) has little public support and no security forces of its own, or any means of coordinating resistance to Haftar's forces.

Nor does it have much in the way of diplomatic support. The international consensus that saw the GNA established by the UN three years ago has vanished.

Despite the Sharara upheaval, Sanallah insists he is optimistic. Visiting London recently, he pointed out that, prior to Sharara's shutdown, national production was 1.28mn bl/d, a five-fold increase in just over two years. If the LNA returns Sharara to NOC control, he expects further growth towards the 1.6mn bl/d it enjoyed before the 2011 Arab Spring revolution. Braving the chaos, US oil services company Schlumberger is reconditioning several fields. "We are working hard with technology, especially with Schlumberger, to produce oil from dead wells," Sanallah said.

Yet February also saw a reminder of the anarchy that infuses Libya when a militia kidnapped 14 Tunisian workers from Zawiya, the country's only functioning refinery. As with previous kidnappings of Tunisians in the area, the militia demanded that Tunisia release their leader, reportedly being held on drugs charges. The workers were released unharmed a few days later, though it is unclear if Tunisia will release the militia chief.

Source: Petroleum Economist
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