Libya is Speeding Up to Pre-2011 Levels of Production

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Libya is Speeding Up to Pre-2011 Levels of Production

Anwar Altaqi – Esam Aziz

Libya’s current level of crude production is around 1.2 million barrels a day (bpd), but Libya is speeding up toward the 1.6 million bpd mark, which was the volume before the civil war erupted in 2011. The timing could not be better: the world market needs every additional drop of oil to face increasingly tightening supplies.

Regional powers are helping Libya to regain its normal level of exports. The global community is also assisting the Libyan people to end the tragic conflict that tore their country apart. Recently, the Libyan National Army, led by General Khalifa Haftar, fighting to rid the country of terrorist gangs, received moral support from the U.S. decision to slap Libyan militia strongman Ibrahim Jadhran with sanctions over the June attacks on the country’s vital oil ports. The sanctions were proposed by Libya’s Permanent Mission to the United Nations. 

Jadhran was the leader of Tripoli-backed Petroleum Facilities Guard (PFG) before promoting himself to the rank of one of the worst gang leaders in Libya. He now finds himself on the wrong end of both the United Nations and the United States. U.S. sanctions now block all of Jadhran’s assets that are under the jurisdiction of the United States, and prohibit U.S. citizens from engaging in any transaction with him. In addition to the financial aspects, Jadhran will be subject to an asset freeze and travel ban from all U.N. members. 

The U.N. and U.S. role in these sanctions is a clear indication that General Haftar now has the full backing of the international community. The U.S. Treasury Department did not mention General Hafter by name, however, its decision is a signal that the international community is putting its weight on the side of the Libyan National Army. Hafter held Libya’s oil industry together during turbulent times when various factions and militias, including Jadhran’s, sought to control the country.

Now, Libya’s oil production has climbed to the highest level since 2013, and can go even higher if security at the nation’s energy facilities can be improved. Output was recently 1.278 million barrels a day and can be increased by “hundreds of thousands” of barrels a day, according to officials, with improved security. A chain of security incidents has hobbled Libya’s oil production despite repeated attempts to restore flows in the politically-divided nation. Output at the country’s largest oil field, Sharara, declined in July after an armed group kidnapped four of the staff. Libya bounced back the following month, helping OPEC’s crude production rise to a nine-month high, according to the International Energy Agency (IEA).

This security deterioration took place as a result of infighting between the groups controlling Tripoli. Last September, the Jadhran group attacked the building of the National Oil Corporation (NOC) in Tripoli, spraying corridors with gunfire, killing two staff members and wounding 10. The attack followed fierce fighting between various groups in Tripoli and near areas under the control of similar groups. The United Kingdom urged its citizens to leave immediately and Italian energy giant Eni evacuated staff by chartered ship.

While Libya succeeded in reaching the level of almost 1.3 million bpd of crude production, oil and gas revenue hit $13.6 billion for the first six months of the year, higher than the $13 billion for the whole of 2017. The news encouraged NOC plans to raise production beyond the 1.6 million bpd it enjoyed before the 2011 collapse to 2.2m bd by 2023. Technically, the target is possible, given that Libya holds 48.4 billion barrels — Africa’s largest reserves.

General Haftar fought Jadhran’s militias in 2016 at the Es Sider export terminal to release oil exports from the gang’s grip. In September 2016, Jadhran was pushed out of the ports by the national army but has since launched two attacks to try to retake his lost lucrative positions. In March last year, his forces held the ports for a week before the army recaptured them. His latest attack, in June, was more substantial, with Chadian mercenaries and Islamists supplementing his own men in a force with more than 300 vehicles. After holding Sider and nearby Ras Lanuf for a week, he was again pushed back by the army, thanks to its monopoly on air power.

The army accuses the Central Bank of Libya, which receives Libyan oil revenues, of financing Jadhran, and realized that the more oil eastern Libya exports, the stronger he will become. Therefore, after recapturing the ports, the army announced that the revenues from oil exports from the east were being transferred from the NOC to a rival authority in eastern Libya.

NOC reacted by closing the ports. Production plummeted by 850,000 barrels per day. Eastern Libya tried to sell Sirte Basin oil independently, but the UN declared the move illegal. The Trump administration, keen to keep Libyan oil on the market to offset price increases from Iran sanctions, encouraged all parties to find a compromise. Then, the army, in a gesture of good faith, gave the ports back to NOC, but only after the UN promised a commission to examine the central bank accounts and make public any payments to militias, including those to Jadhran.