The Libyan army’s Operation Odyssey Lightning on September 11 reopened the main oil-exporting ports in the eastern oil crescent, which had been under the control of the commander of the Petroleum Facilities Guard (PGS) Ibrahim Jadhran. The PGS had been set up as a bipartisan force to guard Libya’s oil assets but its leadership was accused of embezzlement and acting as a private militia.
The Libyan army’s Operation Odyssey Lightning on September 11 reopened the main oil-exporting ports in the eastern oil crescent, which had been under the control of the commander of the Petroleum Facilities Guard (PGS) Ibrahim Jadhran. The PGS had been set up as a bipartisan force to guard Libya’s oil assets but its leadership was accused of embezzlement and acting as a private militia. General Haftar’s forces seized key ports and facilities from the PGS and handed them over to the National Oil Corporation (NOC) in Tripoli. Barrels have began to flow again in the so-called ‘oil crescent’ and tankers have already docked to reinitiate exports. Now attentions are turning to oil in western Libya, through which around one third of Libya’s oil production used to pass.
National Oil Corporation in Tripoli head Mustafa Sonallah argues that the NOC can double production, currently at 290,000 barrels per day (bpd), to 600,000 bpd within four weeks and triple it to 900,000 bpd by the end of 2016. “This depends on receiving the needed funds allocated in the budget and opening the oil crescent ports as well as the valves and pipelines of southwestern Libya,” he says. “I hope this will be the start of a new stage of cooperation and peaceful coexistence among Libyan factions and the end of using oil fields and ports for political purposes.”
Ace in the pack
In November 2014, the Rayaynah Oil Valve (ROV) in western Libya, which regulates the flow of hundreds of thousands of barrels of the country’s potential output, was closed when war erupted and the Fajr Libya Militia (FLM) took control of the Sharara Oil Field (SOF) in southwestern Libya. The NOC initially tried to provide crude oil from other fields to keep the ROV open, resulting in conflict with local unions. The ROV, was closed in late 2014.
Commander of the Oil Field Patrols (OFP) Ali Qarj says they closed the ROV during the war against the FLM in 2014. The decision was taken unilaterally, says Qarj, and the army leadership in eastern Libya did not object or send contrary orders.
Things have since changed. “Our legitimate leaders are now the House of Representatives and its chairman and the Libyan Army’s General Command in Marj and western Libya. We will only open the ROV when we receive orders from either one of these parties,” says Qarj, whose forces closed the major oil valve over 18 months ago. “Our purpose in keeping the ROV closed is purely patriotic and we are not trying to blackmail anybody.”
Pipelines still open
Other fields in the west are still functioning however. The Wafa Oil Field (WOF) in Ghadames in far southwestern Libya, which provides the Mellitah Complex with oil and gas, has not been affected by any conflicts so far. Most of the gas it produces is exported to Italy and it is controlled by a Petroleum Facilities Guards group affiliated with Zintan and Toubou people. The oil in the sea in the Bouri and Sabratha oil fields (opposite the northwestern coast) has also not been affected by the conflicts. These two fields have retained their production of over 100,000 barrels bpd. The Hamada Oil Field, part owned the Arabian Gulf Oil Company, in southwestern Libya resumed operations in early September and produces nearly 8,000 bpd for local consumption.
Head of Measurement and Inspection at the Ministry of Oil Ibrahim Rajab says he is optimistic full production will be resumed within the coming few months. “Whappened in the ports of eastern Libya might be a good sign for reopening the Rayaynah Oil Valve,” says Rajab.
Even the best case scenario will not be able to address Libya’s budget deficit. Crude oil prices fell in September to US$ 40 per barrel and are expected to continue falling. Even if production reaches one million bpd, the annual revenues will be around LYD 20 billion (US$ 14.5 billion), barely enough to cover the payroll. The government’s wage bill in the sector was doubled by the Transitional Council and Abdurrahim El-Keib’s government after 2011.
“These salaries will be spent on imported goods and services since we produce nothing,” says Waleed Sefer, a researcher and businessman. “Our problem does not lie in oil but in those who run the internal and external investment companies that invest more than US$ 100 billion but do not make enough profits to even cover their employees’ salaries. Also those who run the ministries of agriculture, industry and maritime resources who just sit on their hands, watching the structure of suspended projects worth hundreds of billions eroding as if they were the enemies’ possessions. Our primary enemy is the anticipated bankruptcy – that will be the biggest instigator of terrorism and crime.”