Libya’s oil industry is in disarray right when the world needs it more than ever

June 20, 2022 admin-dominor

The Libyan oil ministry told CNN on Wednesday that production had shrunk to a near halt in June, to 100,000 barrels per day (bpd) from 1.2 million bpd last year. But on Monday, oil minister Mohamed Oun told CNN that production had climbed up to 800,000 barrels a day, saying some fields had come back online.

The US ambassador to Libya, Richard Norland, told CNN on Thursday that due to the country’s political tensions “there are certain parties who seek to gain advantage by misrepresenting oil production figures.” The earlier figures provided by the oil ministry were “inaccurate,” he said, adding that “actual production is significantly higher.”

Here’s what you need to know about Libya’s oil:

Why does Libya’s oil matter?

The North African nation sits on 3% of the world’s proven oil reserves, said Yousef Al Shammari, CEO and head of oil research at CMarkits in London. While it is a member of the OPEC oil cartel, it isn’t bound by its production caps due to the political crisis it faces, meaning that it can extract and export as much oil as it wants.

Its proximity to Europe means that it can easily transport oil by sea through much shorter routes than other producers, and most of its oil is exported to European nations, he said.

What is the biggest hurdle facing Libya’s oil production?

Warring parties in the country have used oil as leverage as they struggle for power. A political standoff exists between rival governments in the east and west that has led armed groups backing the eastern government to take control of oil facilities and shut them several times.

The UN-backed Government of National Unity (GNU) sits in the capital, Tripoli, and is headed by interim prime minister Abdulhamid Dbeibeh. In the east is a rival, parliament-elected government that is led by Fathi Bashaga.

Most of Libya’s oil fields and infrastructure are in the east of the country, where commander Khalifa Haftar and his Libyan National Army (LNA) have armed control. He is allied with the Bashaga government.

Who is in charge of oil production?

On paper, the Tripoli-based National Oil Corporation (NOC) is the entity tasked with controlling production and marketing the country’s oil abroad.

Warring parties in the east and the west have tried to seize control of the NOC since 2014, but the sector is overseen by oil minister Mohammed Oun, who belongs to the UN-backed government in the west.

But his influence is weak, says Libya analyst Jalel Harchaoui, and he is caught in a power struggle with the NOC, which “has been going to great lengths” to maximize output.

CNN was unable to reach the NOC for comment.

On the ground, however, eastern-based commander Khalifa Haftar is largely in charge, says Harchaoui. Armed brigades under his command have disrupted production several times.

What is the role of foreign parties?

Oil minister Oun blamed foreign powers with competing interests for Libya’s political crisis. “There needs to be an agreement between them on the best ways towards a mechanism that removes Libya from this crisis,” he told CNN.

Haftar has been backed by Egypt, the United Arab Emirates, and Russia.

The Wagner Group, a Russian private military contractor, entered Libya in 2019 in what the UN found was an effort to back Haftar and his LNA. It deployed several hundred Russian personnel around the largest oil fields, experts say.

In 2020, at the height of their involvement, Wagner seized control of Libya’s Sharara oil field, one of its biggest. The seizure also helped Haftar maintain a blockade of petroleum exports. The presence of Russian personnel gives Moscow the ability to disrupt Libya’s oil supplies if it so wishes, said Harchaoui.

Norland, the US ambassador, said a drop in Libyan production “certainly serves Russian interests and Moscow, no doubt, supports it,” but he attributed the current disruptions to “domestic Libyan factors.”

Is oil prompting the West to make a comeback in Libya?

Earlier this month, the UK embassy reponed in Tripoli, and in March, the US proposed a mechanism to oversee Libya’s oil revenues to resolve the political crisis that is disrupting production.

Approval of the mechanism on the political level will still have to follow, but Libyan parties have agreed in principle on “certain areas of priority expenditure,” said Norland, who resides in Tunisia.

Asked if the US has trust in the UN-backed government to bring back stable output, Norland said that “no single political entity exercises sovereign control over all of the Libya’s territory and that includes the oil fields.”

The digest

White House says Biden’s meeting with Saudi officials will ‘include’ crown prince

The White House said Sunday that President Joe Biden’s upcoming meeting with Saudi officials will “include” the kingdom’s crown prince, Mohammed bin Salman, hours after Energy Secretary Jennifer Granholm suggested there would be a one-on-one meeting.

Background: Granholm told CNN on Sunday that it was her “understanding” that Biden would meet one-on-one with the crown prince next month during his planned trip to Saudi Arabia. On Friday, Biden said he won’t meet with MBS, but that the crown prince would be part of an international meeting.
Why it matters: With Russia’s invasion of Ukraine, a global spike in energy prices and an increasing nuclear threat from Iran, the US has been trying to build back its relationships with Saudi Arabia and the Gulf countries. Biden’s upcoming trip to Saudi Arabia complicates the president’s pledge to make the country a “pariah” for its role in the killing of Saudi journalist Jamal Khashoggi.

Iran says ‘too early’ to talk of Tehran, Riyadh reopening embassies

It would be premature to speak of Iran and Saudi Arabia reopening embassies in each other’s capitals, Iran’s foreign ministry spokesperson said on Monday, after five rounds of talks since last year between the rivals on improving ties.

Background: Riyadh severed ties with Tehran in 2016 after Iranian protesters stormed the Saudi embassy in the Iranian capital following the execution of a Shiite cleric in Saudi Arabia. In April, the two held the fifth round of their negotiations in Iraq, and the first batch of 39,635 Iranian Hajj pilgrims authorized to perform their religious duty in Mecca arrived in Saudi Arabia this month.
Why it matters: Warming ties between the two could significantly de-escalate regional tensions. In a phone call with his United Arab Emirates counterpart on Saturday, Iranian Foreign Minister Hossein Amir-Abdollahian “pointed to the priority of neighbors in Iran’s foreign policy and called for more consultation … to expand bilateral ties.”

Bahrain to start accepting Russia’s “Mir” payment card

Bahrain’s ambassador to Russia Ahmed Al Saati said his country will soon accept Russia’s “Mir” payment card, according to Russian news outlet RT. The ambassador said the move will allow Russian tourists to spend on holiday in Bahrain.

Background: Russia created its own card payment system in 2014 because it feared US and European sanctions against some Russian banks and businesspeople over the annexation of Crimea could block transactions made with US-based Mastercard and Visa. There have been a total of 116 million cards issued.
Why it matters: The recent expulsions of major Russian banks from the SWIFT messaging system means that customers struggle to conduct their business outside of Russia. The acceptance of “Mir” will work to ease that blow. Countries that currently accept “Mir” are: Turkey, Vietnam, Armenia, Uzbekistan, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, South Ossetia and Abkhazia.

Around the region

A man celebrates the end of the Wadi Zalaga annual camel race by shooting with a rifle in Sinai, Egypt.

The controversial practice of celebratory gunfire in the Middle East has come back to the limelight after a child in Egypt was killed by a stray bullet from a former politician’s gun.

A court in Egypt late last week outlawed the use of guns in celebrations, according to local news outlets. The decision came after a shot from an ex-parliament member’s gun at a wedding in the Buhaira Governorate killed a child as he watched the festivities from his balcony. The former politician’s gun license has since been revoked.

The new ruling gives authorities the power to reject, revoke, suspend, or shorten gun licenses as it sees fit.

Casualties from celebratory gunfire aren’t uncommon in the Arab world. On New Year’s Eve last year, a Syrian refugee in Lebanon was killed, and an airplane at Beirut airport was struck by celebratory gunfire. In September, leading soccer played Mohammed Atwi died from a stray bullet during funeral processions for a victim of the 2020 Beirut blast.

Gun celebrations after Jordan’s parliamentary elections in 2020 were met with widespread condemnation, prompting King Abdullah to weigh in. He tweeted at the time, saying “the tragic scene we have witnessed from some individuals after the electoral process, are clear violations of the law.”

Jordan’s al Mamlaka TV estimates that between 2013 and 2018, there were up to 1,869 casualties in the country from celebratory gunfire.

By Mohammed Abdelbary