Libya’s economy faces a further severe slump unless conflicting political factions can agree on a procedure to restart exporting oil. The Oil Crescent, Libya’s oil-rich region, accounts for large parts of the national budget yet exports have been suspended for more than a year, creating a nationwide economic and security crisis.
Libya’s economy faces a further severe slump unless conflicting political factions can agree on a procedure to restart exporting oil. The Oil Crescent, Libya’s oil-rich region, accounts for large parts of the national budget yet exports have been suspended for more than a year, creating a nationwide economic and security crisis.
In March 2015, the Bayda-based interim Libyan government considered the oil ports and fields in the Oil Crescent to be affected by force majeure due to clashes the area witnessed between the Oil Facility Guard Service (OFGS) – affiliated with the Presidential Council – and the Shurouq Forces – affiliated with the previous General National Congress in Tripoli. Since OFGS Commander Ibrahim Jadran is a supporter of the interim government, the closure of the oil fields was swiftly implemented.
In July 2015, the Tripoli National Oil Corporation (TNOC) announced the lifting of force majeure for Libya’s key oil-exporting ports, but Commander Jadran refused to implement it, citing that he was only bound to follow the orders of his government and the Benghazi-based National Oil Corporation (BNOC) – affiliated with it.
The infighting between the Benghazi National Oil Corporation, which is linked to the current interim government, and the Tripoli National Oil Corporation meanwhile has brought oil production to a standstill and the economy to its knees.
Huge losses to the economy
There is a lack of financial liquidity and the budgets allocated for government sectors are in deficit. Subsidies for staples like wheat have been suspended. The economy has endured losses of more than LYD two billion (US$ 1.55 billion), according to the head of Ras Lanuf oil port Nasser Dalaab, since the ports were closed in March 2015.
Mossa Kawni, a spokesperson for the Presidential Council, told Correspondents that the Tripoli and Benghazi based oil authorities merged in June 2016 to streamline the process of recommencing oil production. “Two weeks ago, the TNOC and the BNOC were merged following an agreement signed in Ankara, Turkey, between Maghrebi and TNOC head Mustafa Sanallah,” says Kawni. “So the decisions should be unified under PC legitimacy.”
Failed merger of oil authorities
According to another member of the PC however, Naji Maghrebi, the merger is conditional on the transfer of the BNOC’s Board of Directors to Tripoli, which has not yet happened. Nonetheless, he says he welcomes the increase of Libyan oil exports but without being politically exploited by any party.
Maghrebi had set Friday July 14th as a deadline for lifting the force majeure in Libyan oil ports and resuming exports. Yet the BNOC and the TNOC are still caught in disagreement as to which body has the mandate to lift the force majeure decree. The Benghazi based oil council has repeatedly threatened the TNOC with legal retaliation should it try to independently lift the suspension on oil exports and reopen the ports.
Should the force majeure be lifted, supplying the reservoirs in ports with a regular supply chain from the Oil Crescent fields could still be difficult. On the ground, a number of major oil fields feeding the ports that have been guarded by Commander Jadran since 2012 are said not to be under his control, another obstacle to resuming exports. Current oil reserves in the reservoires of these ports do not exceed four million barrels, according to the head of Ras Lanuf oil port Nasser Dalaab.
The most important of the fields Dalaab mentions are under the control of a separate body, the Oil Facility Guard Service (OFGS), which is affiliated with the General Command of the Libyan army, headed by Lieutenant General Khalifa Haftar, the commander of the Dignity Operation who supports the Tobruk-based Libyan House of Representatives, according to a spokesman for the OFGS Mohammad Sadiq.
Oil Crescent remains insecure
Located approximately 370 km southwest of Benghazi, says Sadiq, these fields are Amal, Nafourah, Bottefl and Winter Shal which have a capacity to produce over 180,000 barrels per day. “These fields will remain closed until Haftar orders to reopen them,” he says. “They are under our control.”
A spokesman for the Jadran-led OFGS, Ali Hassi, says the OFGS controls most of the oil fields in the Zella oil basin (570 km southwest of Benghazi), such as the fields of Waha, Ghani and Zliten. Sadiq however claims that these fields have been subjected to devastation and destruction and will not be able to produce any amounts of oil for a long period.
The Oil Crescent is Libya’s richest oil basin. It produces around two-thirds of Libya’s oil, with the highest levels of production registered in 2012 with 1.1 out of a possible 1.6 million barrels pumped per day.
