Theme: Energy & Transit
The Libyan oil industry has been crippled by the insecurity and political schisms in Libya since the 2011 revolution. Issues of legitimacy and potency have rendered the operations of the National Oil Corporation to be largely inefficient, especially in the east of Libya where the NOC and its overseer the Government of National Accord's authority is contested. Incidents such as the summer 2018 crisis in the Libyan Oil Crescent near Sirte highlight these difficulties. However, despite this the potential of Libyan oil for the entire country remains a significant incentive for opposed parties to begin genuine attempts at compromise and cooperation.
Libya has the largest proven oil reserves in Africa. Around 1970, the country was producing more than 3 million barrels per day (bpd). However, throughout 2018 this figure remained around 1 million bpd, with a significant drop during the summer to around 0.68 million bpd from June onwards. Considering these lower figures of production, and how Libya has been mired in an economic crisis post-2011 there is a good argument to suggest that one method to enable Libya to move from its economic woes is through increased oil production.
However, this is not so simple. Nominally, Libyan oil production is overseen by the National Oil Corporation (NOC), the State-run oil producer and exporter established in 1970. The problem is that what “the State” is in Libya in the current political climate is largely contested. The NOC is overseen by only one of Libya’s political players, the Government of National Accord (GNA) as outlined in the UN Security Council Resolution 2259 (2015), the Libyan Political Agreement.
Its revenues are processed by the Libyan central bank. Both institutions are based in Tripoli, in the West of Libya. The position, legitimacy and power of the GNA within Libya is severely restricted, and there are great causes for the rivals of the GNA, such as the House of Representatives (HoR) in the East and the Tobruk-government they support, to claim that the profits of Libyan oil are not seen by the rest of the country.
This in turn creates suspicion of the objectivity of the NOC which is further compromised due to a lack of enough legal basis: the Libyan Political Agreement not only mandated the GNA but delineated its authority to oversee the NOC. However, this mandate, the Libyan Political Agreement, was not ratified by all legal political representatives in Libya, such as the HoR. As these rivals refuse to acknowledge the legitimacy of the GNA, they also do not recognize its authority as overseer of the NOC. The GNA’s credibility has been further undermined as it has had to rely upon militias for security within the capital, who have in turn profited from oil revenues that the NOC processes within Tripoli.
Perhaps unsurprisingly, this was part of the 2018 summer crisis in the Libyan Oil Crescent near to the town of Sirte. Oil ports under the control of Khlalifa Haftar, of the Libyan National Army group who back the HoR, declared force majeure, and waived contractual obligations of the ports of Ras Lanuf, Es Sider, Zuetina and Hariga, in effect taking control away from the NOC and consequently slashing domestic production. Of course, oil was still exported from these ports, but it was done so via the so-called NOC East parallel oil company. This, the NOC considered to be an illegal exportation of oil.
There is also the issue of other groups, such as terrorists, who see sites related to the oil industry as targets and have attacked these key oil fields and ports to undermine oil production and stifle attempts at State-wide economic recovery. See for instance the attack on the NOC headquarters in September 2018, that was claimed by remnants of the extremist group Daesh who also said that oil industry sites are “legitimate targets” for attack.
Regarding the 2018 summer oil crisis, eventually Haftar did relinquish control of the Sirte oil ports back to the NOC, however his actions exposed a crucial weakness in Libya. The NOC, and the GNA, do not have enough influence in Eastern Libya to control Libyan oil production.
In effect, any access that the NOC has to the oil fields and ports East of the Sirte Desert is a result of the HoR and Haftar allowing them to do so. Even more complicated is the fact that the supposed security apparatus of the GNA, the various militias in the West have become a necessary evil to sustain the oil production from Mellitah to Tripoli, as well as the off-shore ports off the extreme North-West coast. These armed groups in turn have unwanted leverage that they can use to pressure the GNA into their demands, including the illicit sale of oil and its profits.
With these difficulties come some prospects for growth though. Unlike many other issues that have caused and continue to prolong the political rift between Libya’s East and West, there are shared interests here. Libyan oil is so vast that both the GNA and HoR can benefit from it and the economic incentives for these two sides to actively work together in a dialogue are quite significant. There are, however, two preconditions to this end.
Firstly, a decision should be made by both governments to legally mandate the NOC as a truly national institution that will give it enough legal provisions to function across the whole of Libya. Secondly, after determining the legal basis for the NOC, including shares of oil wealth etc., both governments can apply their combined efforts to begin the slow process of liberating Libyan oil from the hands of militias and taking control back into State hands.