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Libya's oil sector faces long-term decline amid anarchy

Oct. 3, 2013 at 3:56 PM   |   Comments

TRIPOLI, Libya, Oct. 3 (UPI) -- Libya's interim government is struggling to crank up oil production again after weeks of shutdowns enforced by armed militias and protesting oil workers slashed output from 1.4 million barrels per day to below 200,000 bpd, virtually zero, in September.

But there's little prospect of any meaningful progress because two years after the fall of Col. Moammar Gadhafi Libya remains gripped by anarchy, maybe terminally fractured by geography and history into competing regional power centers.

"For the foreseeable future, Libya will continue to be plagued with domestic instability, and oil production and exports will continue to fluctuate," the U.S. global intelligence consultancy Stratfor warned.

The slump in production has coincided with major falls in Middle East output by sanctions-battered Iran, technical problems and security disruptions in Iraq, sabotage in Yemen, political upheaval in Sudan and the 30-month-old civil war in Syria.

The Libyan troubles erupted in July when striking workers, oil sector guards and militiamen driven by grievances including salary disputes, official corruption and political rivalries closed oil fields across the North African state.

They also shut down storage and export facilities, wrecking efforts to boost national production up to its pre-2011 civil war level of 1.6 million bpd.

There had been hopes in recent days that production was slowly climbing up again after reportedly hitting a low of only 150,000 bpd in September.

But those expectations appeared to have been dashed Sept. 30 when armed men halted the oil flow from the western Wafa oil field operated by Italy's Eni SpA to the Mellitah export terminal.

The field lies in a mountainous region predominantly inhabited by Libya's Berber minority known as Amazigh.

They fear they'll be marginalized as an ethnic group when the country's long-delayed constitutional drafting process finally gets under way -- if it ever does.

Wafa normally provides an average of 458 million cubic feet of gas a day, along with 23,000 barrels of gas liquids and 38,000 barrels of oil and condensates. The closure threatens at least four power stations.

The interim General National Congress, which took over in August 2012, has been unable to establish a national army because of the deep-rooted tribal, regional and political rivalries that have plagued the country since Gadhafi's 42-year rule ended in October 2011.

It's banking on nationwide municipal elections in 100 regions to help stabilize the political and security environment enough to restore oil and gas production which provide most of Libya's state revenues.

But the elections have been repeatedly delayed for months -- in part because of of voter apathy about a return to stability. That does not auger well for stabilization efforts.

"Just as Tripoli has been struggling with the limits of its own weakened authority, regional government are having similar difficulties maintaining control of their own militias and tribal groups, making a sustainable return to stability in Libyan politics or oil production unlikely for the foreseeable future," Stratfor observed.

The collapse of Gadhafi's quirky regime eliminated a strong, if brutal, central authority that glued the country together.

That left Libya prey to the traditional rivalries between the three traditionally semiautonomous regions, Tripolitania in the west, Cyrenaica in the east and southeast, and the largely desert Fezzan in the southwest.

The reality today, Stratfor noted, is that these powerful regional centers are "unwilling to submit to another central authority following their successful revolt against the Gadhafi regime."

Western governments, particularly those with energy interests in Libya, are pressing Tripoli to reassert its authority and restore some semblance of security.

Even though, "unlike regional oil-producing centers such as Benghazi, the central government has retained the ability to strike deals with foreign oil companies and to collect and distribute revenues through accounts controlled by the Oil Ministry in Tripoli," it still lacks the muscle to protect and ensure oil production and exports.

"The government has continued to rely on local groups, which in turn have been able to leverage Tripoli's dependence to their advantage," Stratfor said.

"Lacking strong enforcement capabilities and wanting to prevent an armed conflict that it would likely lose, Tripoli has been forced to adopt policies if appeasement."

The International Monetary fund has warned that with no oil exports to speak of, Libya will collapse financially if it doesn't start receiving oil revenues soon.

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