Lorenzo Siggillino



Destabilising Actors and the Threat to the Libyan Oil Industry

November 02, 2015

Lorenzo Siggillino, Junior Researcher, Middle East Programme [email protected]

Centre for Geopolitics & Security in Realism Studies 20-22 Wenlock Road, London N1 7GU, United Kingdom www.cgsrs.org / [email protected]

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



1

Destabilising Actors and the Threat to the Libyan Oil Industry

Executive Summary In 2014, the Libyan government split into two factions, resulting in an armed conflict between both sides and their allies. The country is now experiencing a complete lack of security and escalation of violence due to the increasing number of actors aided by their private militias. The Islamic State of Iraq and Syria (ISIS) took advantage of the resultant power vacuum and settled into certain coastal cities, posing a further threat to Libya’s stability. Escalating violence, as well as the absence of security and governance, has had a detrimental impact on the country’s oil sector, which accounts for 95 percent of export revenues and 60 percent of national Gross Domestic Product (GDP). Only a few oilfields are still operational and some of those are exposed to very high levels of risk. Libya needs to secure its active oil facilities in order to avoid further descending into anarchy and to safeguard revenues that are crucial for any confrontation with subversive forces.

Background

Libya was historically divided into three regions:

Fezzan,

Tripolitania

and

Cyrenaica. After reunification in 1951 and the creation of the Libyan state, its rulers faced a growing need to establish the Libyan identity. There was little sense of patriotism towards the nation, but rather, tribal, regional, religious and ethnic bonds

determined

identity.

Gaddafi

sought to undermine these connections by coining the slogan “nahna kull libiyun” (we are all Libyans), but in his efforts to create a common identity, he effectively repressed ethnic minorities.

The 2011 civil war opened the way for tribes, ethnic communities and political movements

to

establish

paramilitary

structures of their own and Libya’s new institutions were unsuccessful in either disarming these groups or absorbing them into the national army. After Gaddafi’s death, many of these factions rose up, either demanding a more important role in any future institutional framework or trying to establish their territorial

autonomy.

In

2014,

the

eventual division into two factions - one aligned with the Tobruq government and

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



Lorenzo Siggillino



3

the other with parallel institutions set in

the highest in Africa and ninth highest

Tripoli - further reduced the state’s

globally. The nation has six main oil

capacity to control the country and

basins, of which Sirte is the most

overcome local, armed actors. Since 2012,

productive and accounts for about 66

uprisings

and

involved

the

protests

have

often

percent of national output, while a

sabotage

and

illegal

quarter of total production comes from

occupation of oil sector facilities. In this

the Murzuq basin, thanks to the El

way,

placed

Sharara and El Feel oilfields. In Murzuq,

significant pressure on central institutions

the Tebus and Tuareg tribes fight each

which need oil revenues to allocate public

other for the control of the region, its

services; hindering oil production is a

natural resources, its lucrative border

quick and effective means to strengthen

routes used for illegal immigration and

their

the smuggling of weapons.

armed

groups

bargaining

have

power

with

the

government. In 2010, before the revolution, Libya was Libya is dependent on its hydrocarbons,

producing about 1.48 million barrels a

which, according to the Organization of

day. Europe generally accounts for 75

the

Countries

percent of Libyan exports of crude oil

(OPEC), accounts for 95 percent of export

(primarily Italy as well as France and

revenues and 60 percent of national Gross

Germany), while 20 percent is sent to the

Domestic Product (GDP) (OPEC Annual

Asia-Pacific

Statistical Bulletin, 2015). These figures,

produced 480.000 barrels a day, earning

even

the

around 16 billion dollars. Oil exports to

quantities generated, demonstrate the

Italy alone had an estimated value of 3.2

importance of oil and natural gas to the

billion dollars, and all the sales to Europe

Libyan

generated a 14 billion dollar profit

Petroleum

if

strictly

economy.

Exporting

dependent

Libyan

on

crude

oil

reserves are more than 48 billion barrels,

region.

In

2014,

(Verda, 2015).

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



Libya

Destabilising Actors and the Threat to the Libyan Oil Industry

The short distance between Nofaliya and the key infrastructures of Ras Lanuf and Es Sider (Al Sidr).

The presence of ISIS At the end of 2014, ISIS took advantage of

organisation

is

the power vacuum in Libya to establish

Misrata tribesmen - allied with the Tripoli

its presence there. The Islamist group

government - and by locals. ISIS has also

occupied part of Derna in late 2014,

absorbed

working in coalition with other extremist

Harawah and Nofaliya this past year,

organisations. After ISIS assassinated an

gaining ground on two of the most

important local leader earlier this year, a

important export terminals: Ras Lanuf

harsh conflict broke out between rival

and Es Sider. Meanwhile, in Benghazi,

radical groups. Consequently, in July,

Ansar al-Sharia and ISIS are allied against

ISIS was driven out of the city, thanks to

the Libyan army (Akbar, 2015).

and

mainly

obtained

opposed

control

the efforts of the Abu Salim Martyrs group and local residents in Derna (Paton, 2015). In Tripoli, the organisation is in alliance with at least one affiliate that is operational in the area, while in June this year, it took control of Sirte, which is close to all the ports used to export the oil produced in its basin. Here, the Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



by

of

Lorenzo Siggillino

Current oil and natural gas production

5

kilometres away from it, El Feel (or the Elephant) has been negatively affected by

The presence of ISIS in Libya further

an ongoing strike by security guards,

complicates a situation characterised by

who

the complex rivalry between the two

salaries because of the intensive clashes

governments and their respective allies.

involving Tebus, Tuaregs and local tribes,

Furthermore, the Libyan context is not

as well as frequent cuts in electricity

only affected by political dynamics, but

(Bousso, 2015).

have

been

demanding

higher

also by clashes between rival tribes. The political

power

large

Close to the Algerian and Tunisian

number of weapons available in the

borders, in the Ghadames basin, the Wafa

country

ideal

field is active and generates 30,000-35,000

environment for escalated violence. This

barrels a day, in addition to natural gas

lack of security has had a significant

exported to Italy and used for domestic

impact on oil and natural gas production.

consumption. In the offshore fields,

have

vacuum

and

created

the

output

remains

unaffected

by

the

Libyan oil production in September was

escalation of violence. Al Jurf and Bouri

around 350,000 barrels a day, although an

are currently operating at full capacity,

official figure is difficult to determine.

and their combined production - about

The Sirte basin currently accounts for

80,000 barrels a day - is exported through

around 200,000 barrels, while 80,000

their offshore platforms.

barrels are produced in the offshore fields close to Tripoli and the remaining barrels

In the Sirte basin, the situation is even

are produced by the Italian oil and gas

more complicated, due to the presence of

company Eni’s fields in the west of the

ISIS.

country. Hydrocarbons produced in El

declared force majeure in 11 oilfields,

Sharara and El Feel are strictly dependent

after violent acts committed by alleged

on the pipelines carrying oil to the

ISIS affiliates. The group seeks to deprive

Mediterranean Sea, a few kilometres

the Libyan governments of oil revenues,

away from Tripoli. These facilities pass

in order to foster turmoil and ease its

through territories controlled by the

territorial advance. After attacks at al-

Zintani brigade, which is aligned with

Mabrouk, al-Bahi and al-Dahra oilfields,

Tobruq.

this

production has been halted in many

community blocked the pipeline moving

fields close to Sirte, which has become the

oil from El Sharara to the Zawiya port,

ISIS’ foothold.

In

November

2014,

In

March,

Libyan

institutions

demanding forces loyal to Tripoli to abandon the area. As a result, El Sharara,

Two of the most important oil terminals,

Libya’s

Ras Lanuf and Es Sider, remain closed

largest

completely

oilfield,

closed.

is

Located

currently a

few

after militias attacked the latter in

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



Destabilising Actors and the Threat to the Libyan Oil Industry

December 2014. The two ports are located

Most of the oil produced in Cyrenaica is

in an area that sees frequent clashes

currently generated by the Arabian Gulf

between allies of the two administrations

Oil Company (AGOCO - one of NOC’s

(Bousso, 2015). The short distance of

subsidiaries). This branch is active in the

these key facilities from the ISIS-occupied

eastern part of the Sirte basin and sends

Nofaliya (less than 100 kilometres away)

products to the Marsa al Hariga port,

further endangers security. In the Sirte

which is close to Tobruq and controlled

basin, most of the oilfields operated by

by

the Zueitina Oil Company, Sirte Oil

government. In July, AGOCO declared

Company and Waha Oil Company (three

production of 220,000 barrels a day,

branches of Libya’s national oil company:

mainly originating from the Sarir oilfield

National Oil Corporation - NOC) have

and other fields located in the same zone.

been shut down because of security

Sarir has a capacity of more than 200,000

issues or because production could not be

barrels a day, but its current output is

released to the market. These fields

affected by power cuts (al-Warfalli 2015,

mainly export their output through Ras

“Update 2”).

its

internationally

Lanuf and Es Sider.

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



recognised

Lorenzo Siggillino

7

Many international oil companies also

on the industry. Revenues from oil and

declared force majeure during this year,

natural gas flow into the Central Bank of

including Repsol, which operates in the

Libya, which divides profits between the

El Sharara oilfield, and American oil

two

companies, active in the areas attacked by

hydrocarbons allows both Tripoli and

ISIS. Eni has been the only foreign oil

Tobruq to allocate services, pay salaries

company able to maintain its activities,

and provide security in the territories

thanks to the location of the fields it

they

operates

and

organisations, on the other hand, seek to

systems.

As

its far

advanced as

natural

security gas

is

administrations.

control.

undermine

The

Terrorist

legitimate

export

and

of

criminal

institutions

in

concerned, Eni currently produces more

order to create favourable conditions for

than 90 percent in the west of the

recruitment and expansion. For these

country, thanks to the Wafa field and the

factions, the absence of a state is the best

offshore

complex.

possible scenario and accordingly, one of

However, many gas fields in the Sirte

their objectives is to ensure that both

basin have been shut down because of

governments are unable to respond to the

strikes or lack of security. The natural gas

needs of their populations and provide

generated by Eni is sent to the Mellitah

security. Attacks on oil production are

establishment and is used both for

therefore

domestic consumption and exported to

Tripoli and Tobruq.

Bahr

Essalam

key

to

undermining

both

Italy through the Greenstream pipeline, as agreed under the Western Libya Gas

Gaddafi’s administration employed the

Project. Greenstream, a project developed

policy of saving money as contingency

by Eni and the NOC, connects Mellitah

for future periods of low oil prices.

with the south of Italy. This pipeline has

However, since July 2013, Libya has been

an annual export capacity of 10 billion

unable to produce oil at its maximum

cubic metres of natural gas. The gas

capacity. And in the last 12 months, oil

produced in Wafa and Bahr Essalam is

prices have collapsed, forcing Libya to

crucial for the country, as the exports

draw funds from its national reserves,

generate important revenues and reserves

which in December 2014 accounted for 76

provide energy to national industries and

billion

local consumers (Eni, 2015: 54).

additional threat to oil production also

dollars

(Verda,

2015).

An

comes from ethnic minorities within Risks

Libya seeking independence.

Armed groups, aligned with the two rival

In August 2015, a bomb exploded in

governments, do not want to hinder the

Tripoli in front of the Mellitah Oil

output of hydrocarbons because they are

Company’s (a NOC-Eni joint venture)

aware of Libya’s economic dependency

headquarters. ISIS claimed responsibility

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



Destabilising Actors and the Threat to the Libyan Oil Industry

for the attack, demonstrating once again

salaries

without

its capacity for operating inside Tripoli.

reserves.

The

The company accounts for almost all

institutions

natural gas exports and 30 percent of

forces largely depends on its military

current oil production. Oilfields operated

capabilities, as it is crucial for legitimate

by AGOCO in Cyrenaica do not present

authorities to be better equipped than the

particular

armed groups seeking the dissolution of

risks,

as

Tobruq

controls

territories around Sarir and along the

to

depleting capacity

national

of

overcome

Libyan

subversive

the Libyan state.

pipeline carrying oil to Marsa al Hariga and the port city is completely controlled

Offshore fields do not require additional

by

recognised

security in general and the export of oil

government. Al Jurf and Bouri offshore

generated in the Sarir complex is exposed

fields enjoy high levels of security, as well

to a set of controlled risks: the pipeline

as the offshore platforms used for

carrying oil to Marsa al Hariga crosses

exports. Onshore production in the west

areas controlled by Tobruq, and ISIS has

of the country comes from Wafa and El

already been defeated in Derna. It is

Feel, which are located in areas occupied

therefore

by ethnic minorities. These fields are

predominantly in the west of the country,

close to lucrative border routes, where

that is exposed to elevated risks. Wafa

criminal

and El Feel are located in territories rife

the

internationally

organizations

manage

the

onshore

with

migrants (Geopolitical Review 2015: 11-

criminal

12). Pipelines connecting Wafa and El

minorities living close to these two

Feel to Mellitah pass through territories

oilfields

inhabited

Berber

transportation facilities might represent a

communities as well as active criminal

destabilising factor, since they started

networks. In addition, ISIS has already

opposing

demonstrated

attack

institutions rejected their demands in

Tripoli - which is only 100 kilometres

2012. Tebus demanded the removal of all

away from the Mellitah establishment -

the discriminations they were subjected

on numerous occasions.

to while the Tuaregs and Berbers sought

rival

its

tribes,

capacity

to

activities

production,

smuggling of weapons, drugs and illegal

by

illegal

oil

committed

organisations, and

the

so

along

state

after

by

ethnic pertinent

national

the right to preserve their languages. It is Conclusion

considered likely that these groups are

Libya is currently entrenched by several

now involved in illegal activities carried

destabilising elements. The oil sector

out in their areas (Kohl 2014: 433-436).

presents an important source of stability,

In the long run, Libyan authorities should

as maintaining high oil production levels

restart the dialogue process with the

allows the governments to provide better

ethnic communities in order to include

security, equip armed forces well and pay

them

within

the

future

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



political

Lorenzo Siggillino

9

framework and secure their loyalty. The

Mellitah, along the pipelines departing

biggest threat currently is the ISIS, which

from El Feel and Wafa and prevent the

has already attacked the Mellitah Oil

ISIS

Company in Tripoli. In the short run,

equipment by means of illegal trade and

national authorities in Tripolitania should

relations with criminal organisations.

from

obtaining

better

military

implement high security measures in

References

Verda M. (2015), “Libia: il ruolo delle esportazioni energetiche e l’importanza per l’Italia”, accessible at: http://www.sicurezzaenergetica.it/2015/09/libia-il-ruolo-delle-esportazionienergetiche-e-limportanza-per-litalia/ ENI (2015), “Relazione finanziaria semestrale consolidata al 30 giugno 2015”, accessible at: http://www.eni.com/it_IT/attachments/documentazione/bilanci-rapporti/rapporti2015/Relazione_finanziaria_semestrale_consolidata_al_30_giugno_2015.pdf ENI

(2014),

“Factbook

2014”,

accessible

at:

http://www.eni.com/it_IT/attachments/documentazione/bilanci-rapporti/rapporti2014/fact-book-2014.pdf OPEC

(2015),

“Annual

Statistical

Bulletin

2015”,

accessible

at:

http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB20 15.pdf EIA

(2014),

“Libya:

International

energy

data

and

analysis”,

accessible

at:

http://www.eia.gov/beta/international/analysis.cfm?iso=LBY OpenOil

(2012),

“Libya

Oil

Almanac”,

accessible

at:

http://openoil.net/wp/wp-

content/uploads/2012/08/Libya-PDF-v-2.0.pdf

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)



Destabilising Actors and the Threat to the Libyan Oil Industry

Geopolitical Review (2015), “Libya Country Risk”, Geopolitical Risk Analysis, No. 1, accessible at: http://geopoliticalreview.org/wp-content/uploads/2015/06/LIBIA-CountryRisk-GRA-n.1-06-20153.pdf Kohl I. (2014), “Libya’s ‘Major Minorities’. Berber, Tuareg and Tebu: Multiple Narratives of Citizenship, Language and Border Control”, Middle East Critique, Vol. 23, No. 4, 2014: 423-438. El-Ghobashy T. and Morajea H. (2015), “Two Main Libyan Militias Are Maintaining a Truce

to

Battle

Islamic

State”,

The

Wall

Street

Journal,

accessible

at:

http://www.wsj.com/articles/two-main-libyan-militias-are-maintaining-a-truce-to-battleislamic-state-1441658061 al-Warfalli A. (2015), “Libya's oil production at 350,000 to 400,000 bpd -official”, Reuters Africa,

accessible

at:

http://af.reuters.com/article/investingNews/idAFKCN0QT1BS20150824 al-Warfalli A. (2015), “Update 2-Eastern Libyan oil firm pumping around 220,000 bpd”, Reuters

Africa,

accessible

at:

http://af.reuters.com/article/libyaNews/idAFL5N10220B20150722 Bousso R. and Hardy W. (2015), “Update 1-Libya's oil production at 432,000 bpd -NOC chairman”,

Reuters,

accessible

at:

http://www.reuters.com/article/2015/06/16/libya-

security-oil-idUSL5N0Z22BV20150616 Paton C. (2015), “Isis in Libya: Islamic State driven out of Derna stronghold by al-Qaedalinked militia”, International Business Times, accessible at: http://www.ibtimes.co.uk/isislibya-islamic-state-driven-out-derna-stronghold-by-al-qaeda-linked-militia-1506241 Akbar J. (2015), “ISIS' incredible show of force on Europe's doorstep”, Daily Mail, accessible

at:

http://www.dailymail.co.uk/news/article-2957344/ISIS-incredible-force-

Europe-s-doorstep-Terrorists-Libya-beheaded-21-Egyptian-Christians-parade-fleet-brandnew-police-cars-cheering-children.html

Copyright© of the Centre for Geopolitics & Security in Realism Studies (CGSRS)