The oil sector is a major driver of Libya’s economic, social and political life. This has made it a target for attacks and blockades. Since 2011, competition over the control of oil has led to political and armed conflicts, while mlitias and terrorist organizations have often attacked oil infrastructure. The sector is also affected by the lack of funding and the reality of a decrepit infrastructure resulting from years of neglect and armed conflict. Blockades, breakdowns and attacks on oil infrastructure have reduced Libya’s average daily production from 1.2 million barrels per day to 0.82 million in the past ten years. It is hence important to understand what are the threats to the oil value chain in order to identify its weaknesses, but also espaces for reform and amelioration.
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Libya’s oil production and blockades on its infrastructure since 2011. There is a causal relation between the blockades on oil infrastructure in Libya (grey bars) and the variances in oil production (yellow line).
The Oil Value Chain in Numbers
Libya’s oil sector accounts for 95% of the country’s exports, it employs an estimated 25% of the labour force and it’s its main source of foreing exchange. In the first quarter of 2021, Libya’s oil revenue amounted to over 5.8 billion USD. Despite the challenges that over ten years of conflict have posed to the industry, the National Oil Corporation (NOC) has reached a production rate of 1.3 million barrels of crude oil per day as of June 2021. This is the highest level of production attained since the ousting of Muammar Qaddafi in 2011, when production stood at 1.6 million. The NOC aims to increase oil production to 1.45 million bpd by the end of 2021.
Risks to the Oil Value Chain
Political Risk
Since 2011, control over oil resources and oil income, became one of the main leverage points in the political and armed competition between the western and eastern administrations. In 2020, the Libya National Army (LNA) blocked eastern oil terminals for over a year, decreasing in production and exports by over 60%. Here, the oil blockade was used as a bargaining chip to demand a better distribution of oil revenues between regions. The current political situation, wherein the Government of National Unity (GNU) is, at least nominally, the country’s only administration, reduces the likelihood of a politically motivated blockades. However, ongoing disputes regarding the general elections could upset political stability. Stakeholders in the east and south of the country, where the majority of oil infrastructure is located, could turn to blockades to apply pressure on the Tripoli government regarding the political process.
The majority of oil fields and terminals are in LNA controlled areas. Four of Libya’s six basins are under LNA’s control, as well as four of its six exporting ports. Since 2014 Haftar has been able to use oil blockades as political and financial leverage.
Infrastructural risk
Libya’s oil infrastructure is heavelly deteriorated. The infrastructural risk impacts oil production and revenues. For instance, numerous leakages in the Farigh-Sider pipeline led to a reduction of production by 200,000 barrels per day in January this year. The degradation of pipelines, treatment and storage units will continue to hinder production unless the state and international corporations invest in maintenance, which is both dependent on budget and on the improvement of the security situation. Oil companies operating in Libya suffer from budget shortages due to the volatility of production. Nationally, the approval of the General Budget is necessary to the disbursement of NOC allocations. In addition, despite a decrease in fighting since October 2020, Libya remains a high-risk country, which prevents international companies from sending personnel to carry out maintenance work. A recent allocation by the Ministry of Oil of 1.48 billion LYD could ease the situation, but further investment is required in order to carry out maintenance and avoid closures.
Lack of State Capacity
Workers strikes, in particular the Petroleum Facilities Guard (PFG) have been behind several blockades at oil facilities over the past ten year. The PFG is a paramilitary unit in charge of oil facilities security. In reality, it is a patchwork of existing local militias integrated under the PFG banner. In the past, these groups have blockaded oil terminals and fields in the east and south of the country, the latest one in April to demand the disbursement of overdue salaries. The stalled approval of the budget will likely continue to constrain the GNU’s financial capacities. If the PFG fears that this could impact their funding it is likely that they would stage blockades. In addition, some of the PFG branches in the east, which are known to support the LNA, could use blockades as a way to gain leverage within the context of current political disagreement over the December elections.
Terrorist Risk
The recent Islamic State (IS) attack in Sebha has renewed fears about the probability of an attack on oil facilities, despite a sharp decrease in terrorist activity since 2018. IS has been responsible for 15 attacks on oil infrastructure between 2014 and 2018. The South of the country is particularly vulnerable to infiltration by terrorist groups, and it’s where some of the most productive oil fields are found such as the Sharara and the El-Feel fields. Despite the recent car-bomb attack in Sebha, the government and the LNA have continued their efforts in curbing terrorist activity in the region. They have carried out over fifty security operations and arrested and killed at least 60 suspects over the past two years. This decreases the likelihood of an attack on oil facilities, although the situation should be closely monitored.
Location of ISIS attacks of oil facilities between 2014 and 2018. The darker the colour of the dot the more attacks were registered in the area. There has not been any attacks on oil infrastructure linked to terrorist organizations since 2018.
Militia Competition
Militias have in the past sought control of oil facilities to use it as leverage to make political or financial demands. On numerous occasions, this has caused the NOC to close oil fields and halt production declaring force majeur. Since the formation of the GNU, the government has followed a policy of appeasment of militias to reduce fighting. However, without the approval of the budget, it is unclear whether the government can continue paying the salaries of all militia members. This could trigger competition for funding, and prompt some militias to blockade oil facilities to gain leverage vis-à-vis the government. At the same time, a majority of militias in the south and east of the country respond to a more or lesser extent to the LNA, rather than to the Tripoli government. Hence, as long as the LNA’s General Command is content with the political developments, the militias that operate under its umbrella are unlikely to blockade oil facilities.
Population Discontent
In the past, citizen groups from the Fezzan have blockaded oil infrastructure, such as the Sharara oil field in 2018, to demand improved socioeconomic conditions. In late June, the Fezzan Anger Movement threatened to shut down oil infrastructure if the government continued to ignore their demands for greater political, social and economic investment in the region. Similarly, unemployed residents in Ras Lanuf closed the Sider oil port to demand job opportunities in the oil companies operating in the city. The government is unlikely to make these issues a priority at the moment as the elections and the electricity crisis, among other topics, are more pressing. This situation is likely to lead to blockades in the coming months. Nevertheless the NOC and international companies have recently made pledges to increase investment through Corporate Social Responsibility projects, which could satisfy the protestors and avoid the disruption of the oil value chain.
Gasoline prices in Libya per region during 2020. Prices were highest in the south of the country during 2020; a tendency that has reportedly increased since then.
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