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Libyan oil industry hit by legacy of violence

May 16, 2013 at 11:03 AM   |   Comments

BENGHAZI, Libya, May 16 (UPI) -- Protesters closed the Zueitina oil refinery in eastern Libya for the second time in six months this week, the latest setback for the North African country's troubled efforts to develop its crucial energy industry in the violent aftermath of the 2011 civil war.

Wednesday's blockade by disgruntled job-seekers at Zueitina, through which 20 percent of Libya's oil exports flows, was mild compared to the violence of heavily armed militias who regularly invade oil fields and other facilities.

But the events at the plant, 540 miles east of Tripoli, illustrates how the oil and natural gas industry, on which the economy depends, is battered by disruptions that Oil Minister Abdelbari al-Arusi says have cost Libya about $1 billion over the last five months.

In March, for instance, rival militias fought for two days over who should provide "protection" for the Mellitah oil and gas complex in western Libya run by the National Oil Co. and Eni of Italy, the biggest foreign energy operator in the country.

One man was killed and several wounded. The shootout temporarily halted natural gas exports to Italy before the national army was able to stop the gunplay.

The government, despite its weakness and inability to stamp out the lawlessness that has swept the country since longtime dictator Moammar Gadhafi was overthrown in the 8-month civil war, has been able to restore oil production to its pre-conflict level of 1.6 million barrels per day.

There are an estimated 500 militias and armed groups across Libya with an estimated 250,000 men under arms outside of government control. These are largely formed around tribal alliances split between the west, where the capital Tripoli is, and the oil-rich east around Benghazi, the center of the NATO-backed uprising against Gadhafi that turned into a civil war and ended his 40-year rule.

Much of the rivalry is over who will control the oil and gas industry and the economic power it bestows.

Benghazi and the nearby city of Deraa are longtime strongholds of al-Qaida, which, despite a brutal crackdown by Gadhafi's security forces, was one of the main driving forces behind the uprising and remains a serious threat.

It should be noted that the 40-man force from an al-Qaida affiliate that attacked the In Amenas gas complex in Algeria's southeastern desert in January did so from Libyan territory.

That assault and the four-day siege that ensued ended in a bloodbath when the Algerian army stormed the complex, killing 39 foreigners, mainly technical staff.

Most of the attackers, who struck in apparent retaliation for French intervention against jihadists in northern Mali, were also killed.

But the most worrisome element of that bloodbath was that In Amenas, operated by BP and Norway's Statoil, was the first major energy complex to be attacked by al-Qaida in North Africa.

There are deep concerns that other facilities, in Libya and neighboring Algeria, both major producers, could now be targets. A campaign of that nature would have crippling ramifications for Libya's limping oil industry.

"In Amenas was a game-changer," a Western oil executive observed. "It's been a wake-up call for the Libyan government.

"Before the revolution, oilfields were not protected ... Now the government's taking measures, with more guards and intelligence-gathering, especially with the prevailing political environment and the situation in Mali and Algeria."

The government, gripped by ideological and tribal rivalries and with little real power on the ground, has reinforced its Petroleum Facilities Guard, which now has a strength of 18,000, many of them former militiamen.

However, they're invariably outgunned by the big militias that were armed by NATO during the war and also plundered Gadhafi's vast arsenals.

There are suspicions that al-Qaida and the warring militias have infiltrated the PGF, not to mention the army.

The government's drawing up an Oil Law to regulate the industry that was previously controlled by Gadhafi.

Tripoli hopes to launch a new licensing round by the end of the year to expand exploration and boost production.

But the political disarray and the marauding militias make that unlikely.

Foreign companies have been reluctant to send foreign staff to Libya, even though they're vital for rehabilitating the industry.

Some are even cutting back on the number they have in-country. BP said May 12 it withdrew some "non-essential overseas staff" because of security concerns.

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