Revival of Libyan oil industry: Opportunity for peace making or further disruption

While all eyes of international society are bent on 75th session of the UN General Assembly, there are other events of quite a comparable importance happening in Libya. Libya’s National Oil Corporation announced a partial resumption of oil production and export. The decision of the oil workers came at the background of the agreements between the Commander-in-Chief of the Libyan National Army (LNA) Khalifa Haftar and the Deputy Prime Minister of the Government of National Accord (GNA) of Libya, Ahmed Maiteeq.

“With God’s blessing, work has begun on the Sirte Oil and Gas Production fields”, Libyan National Oil Corporation (NOC) announced Sunday evening. The NOC representatives also informed that it would resume oil production operations at three fields located between Sirte and Benghazi – Zalten, Ar-Rakuba and El-Lehib. Export through the port of Marsa-el-Brega is also resuming. On Thursday, September 24th, according to media reports, the Arabian Gulf Oil Co. is expected to resume operations, which exports products from the Marsa-al-Hariga terminal in the port of Tobruk in eastern Libya which is controlled by the LNA. The first tanker is to arrive there on the same day.

The NOC`s announcement came shortly after the LNA commander, Field Marshal Khalifa Haftar`s decision to resume oil production and export, which he has blocked since January, but only under conditions of “guaranteeing a fair distribution of income and not using them for financing terrorism”.

The cancellation of the force majeure regime put pressure on oil quotes – November futures for Brent fell by 4.2%, to $41.3 per barrel. Before the restrictive measures, Libya produced 1.1 million barrels per day, and after the introduction of the force majeure regime – only about 0.1 million. Thus, theoretically, about 1 million barrels of oil per day could return to the market, which is comparable to 1.1 % of world demand.

This is a very significant volume and could disrupt the efforts of OPEC + countries to stabilize the market, given that demand is expected to decline significantly in the fourth quarter due to new restrictions related to the coronavirus. Libya, although an OPEC member, is exempt from production cut obligations, as well as Venezuela.

Nevertheless, the decision to resume oil production is decisive in an attempt to stabilize the country’s budget of Libya, which is mainly replenished by oil. Nine months of blocking export and production have affected the financial position of the country.

The bulk of the Libya`s oil facilities and ports have not been operational since January this year. It should be emphasized that it is the eastern part that has the main reserves of energy resources and the corresponding infrastructure. At the same time, the region had no influence on the distribution of oil revenues. Therefore, the decision taken by the Libyans was supported primarily by the representatives of the Libyan National Army, who control this territory.

The reasons for Khalifa Haftar’s decision were clarified literally half an hour after his speech by the LNA spokesman Ahmed al-Mismari. According to him, the resumption of oil fields for a month is the result of an inter-Libyan dialogue with the vice-premier of the Tripoli-based GNA Ahmed Maiteeq. The parties have developed an agreement on the fair distribution of oil revenues and the formation of a technical committee: its members will oversee the implementation of this decision and deal with disputes.

Thus, the agreement between Haftar and Maiteeq opens an opportunity to restore full export of Libyan oil. It will give the country the money it needs, which is important against the backdrop of mass protests that have shaken parts of the country in recent weeks. The protests occurred on the territories controlled by the government in Tripoli as well as the government in Tobruk. The NOC is obliged to distribute oil revenues throughout Libya.

In addition, the Haftar-Maiteeq agreement could be a factor in building confidence between parties to the conflict in Libya. Thus, it will serve the cause of peace and restoration of normal life throughout the country.

However, news about the dialogue between Khalifa Haftar and Ahmed Maiteeq had sparked a scandal in Tripoli. On Sunday night, the Supreme Council of State, created as an advisory body to the GNA, rejected the agreement between the two politicians, calling it “violating current laws.” Some deputies of Libyan parliament sitting in Tripoli had spoken in a similar way.

Experts believe that this reaction may be due to fear of the rise of Ahmed Maiteeq. By concluding an agreement with Haftar, he applied for political leadership. Given that a few days earlier the head of the GNA, Fayez Sarraj, had announced his decision to resign, there was a tense political struggle in Tripoli to take his place. Meanwhile, the head of the Supreme Council of State Khaled al-Mishri is considered one of the main contenders.

However, Khaled al-Mishri and many other members of the GNA have been compromised by ties to the radical organization Muslim Brotherhood. Ahmed Maiteeq as a more moderate politician is a more acceptable figure in the eyes of the international community. By concluding an agreement with Haftar, he has demonstrated his effectiveness.

It is worth to mention that about a month ago, the head of the GNA Fayez Sarraj and the House of Representatives` speaker based in the east of Libya, Aguila Saleh, named the transfer of proceeds from the sale of raw materials to the NOC account in the Libyan foreign bank among the ceasefire conditions.

This money was not to be cashed until a comprehensive political agreement was reached, in line with the results of the Berlin Conference in January. Almost simultaneously with this, political dialogue was resumed between the parties to the conflict. The negotiations took place in Morocco and Montreux, Switzerland. However, Khalifa Haftar, on whom the implementation of the ceasefire agreements and the unblocking of oil exports largely depended, did not show his attitude towards the statements of Fayez Sarraj and Aguila Saleh until September 18.

On Friday, September 18, making his own decision, the Field Marshal said that all the initiatives which were discussed before in order to resolve the Libyan crisis “ended in failure.”
Jalal Harshaoui, a researcher on Libyan issues at the Dutch Klingendaal Institute of International Relations, explained why the NOC hastened to resume oil production, despite the critics of the Haftar-Maiteeq agreement.

“First of all, the NOC has not been subordinate to any Libyan government for many years. This company is used to acting almost independently, when it is not physically impeded by armed groups. Secondly, under the current CEO Mustafa Sanallah, the NOC`s policy has always been to produce and export as much as possible, regardless of political or financial differences between the Libyan conflict parties”, the expert emphasized.

One should also not write off the interest of some European states in the resumption of the functioning oil industry in Libya. In December 2019, Libyan authorities approved the acquisition of a 16.33% stake in Marathon Oil by the French company Total under the Waha Oil concession. It is assumed that Total will invest $ 650 million in this project, increasing production by 180 thousand barrels per day. The Italian ENI is also interested in the resumption of oil production

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