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Libyan Oil Output Cut in Half by Strikes, Disruption

FILE - Oil and gas installations are found throughout Libya. This one, built by the Italian ENI group, is on the coast near Mellitah, Libya.
FILE - Oil and gas installations are found throughout Libya. This one, built by the Italian ENI group, is on the coast near Mellitah, Libya.
The Libyan oil industry is in the midst of its worst crisis since the 2011 civil war because of lawlessness and strikes at major petroleum facilities.

In the latest disruption, security guards re-imposed a strike they called off over the weekend, forcing the closure of Libya’s two main crude oil export terminals. Operations had resumed on Sunday at the ports of Es Sider and Ras Lanuf after a two-week stoppage. The two ports have a combined export capacity of around 600,000 barrels per day.

The work stoppage came just hours after gunmen wounded a guard and ransacked an oil service center Sunday evening in the eastern oasis town of Awjila. Libyan officials said they believe the attack was linked to competition between militia groups over oilfield contracts and the placement of their members in the newly created national Petroleum Facilities Guard, a force under the direct authority of the Defense Ministry, but made up largely of former militia members who have often fought among themselves.

Last week, Libyan Prime Minister Ali Zeidan warned of the economic consequences of the off-and-on disruption to oilfield, production and export terminals. He said oil exports had plunged by 70 percent – a devastating financial setback for Libya, which relies on oil exports for nearly all of its foreign revenues.

Oil industry officials said the export terminals at the Es Sider, Amna and Sirtica oilfields had already filled up their storage tanks to capacity and had to shut down production.

Libya's oil minister said Monday the government was working to end the disruptions by meeting with the protesters and appointing a new head of the Petroleum Facilities Guard -- but that appointment also appears to have enraged some of the strikers.

“Groups closed the ports of Ras Lanouf, Zeuitina, Al-Sedra and Al-Hariga, forcing a drop in production to less than 30 percent of normal levels,” Zeidan told reporters.

General insecurity adds to the crisis

Over the past few months the oilfields and export terminals have been affected by everything from striking security guards to militias fighting over who should get security contracts. There also has been criminal looting at petroleum service centers and production facilities and fears of terrorist activity by al-Qaida or other jihadist groups.

A surge in bombings, assassination and a mass jail breakout in the country’s second-largest city, Behghazi has added to the insecurity.

Libyan Oil and Gas minister Abdel Bari Ali al-Arousi is deailing with a lot of problems these days.
Libyan Oil and Gas minister Abdel Bari Ali al-Arousi is deailing with a lot of problems these days.
According to the country’s oil minister, Abdelbari al-Aroussi, Libya is now only exporting 330,000 barrels through the port at Zawiya, the one remaining export terminal that so far has been free of disruption or strike activity by guards demanding back pay and better salaries.

Oil accounts for more than 80 percent of Libya’s gross national production and more than 95 percent of exports. The country’s oil production stood at 1.6 million barrels a day just before the 2011 uprising that toppled Muammar Gaddafi. During the NATO-backed uprising oil production it shrunk to just 60,000 barrels a day, according to the International Energy Agency.

Libya’s transitional authorities were quick to encourage foreign oil companies and the Libyan National Oil Corporation to resume production quickly after fighting stopped. In the autumn of 2011, to the surprise of foreign oil experts, they claimed production almost matched pre-war levels.

But oil industry insiders told VOA they thought the numbers were exaggerated and output was at least a quarter of a billion barrels a day short of government claims. Some still remain skeptical about government figures.

“It isn’t that hard to play around with the numbers,” said a foreign oil consultant, who declined to be named, fearing to do so could jeopardize his future work for Libya’s National Oil Corporation. “Production did resume quite quickly because everyone took a short cut when it came to repairs and delayed replacing pipelines and equipment that are past their optimum life spans.”

Long-term problems

Security issues and the resulting supply disruptions plaguing Libya’s oil industry are deterring some major foreign oil companies from competing for contracts to manage the fields, say oil analysts. Industry experts say some oil majors such as Royal Dutch Shell have been cautious about bidding for contracts or expanding operations in Libya.

Although denying it was pulling out of Libya, late last year Shell suspended some exploration projects in the country, arguing the results had been disappointing. Industry insiders say a key reason for that decision revolved around security concerns.

“Shell wants a stable security environment – and they aren’t the only ones worried about strikes, opportunistic gun attacks and spotty security. No one wants to see a repeat of the al-Qaida attack earlier this year in Algeria,” said a foreign oil consultant, who has reviewed the workings of the recently created Petroleum Facilities Guard.

“The Libyan government is still a long way from consolidating control of the country’s oilfields, pipelines and ports,” he says.