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Libya - Oil and Gas

Libya's hydrocarbon production and exports were substantially affected by civil unrest over the past few years. A peace agreement between the two rival parliaments in Libya would give a boost to Libyan oil exports, as two stalled ports that accounted for almost 50 percent of the countrys crude oil exports could resume operations. While benefitting the Libyan economy, the increase in oil exports will likely push international oil prices further down. Libya has the potential to produce up to 1.8 million barrels of oil per day but its output has dropped to one third after the conflict.

Control by the Government of National Accord of procedures and facilities on the ground within the hydrocarbon sector is key to the protection of the countrys primary source of revenue, which had been severely diminished since the revolution, with production falling from 1.5 million barrels per day in September 2012 to 380,000 in November 2015.

On the ground, loopholes are being exploited by armed actors who have been seeking to generate financial and political gain from the control of oil fields, pipelines and export terminals, fuelling local conflicts. In April 2015, the Permanent Representative of Libya to the United Nations stated that, while the oil ports of Hariqah, Zuwaytinah, Brega, Ras Lanuf and Sidrah were under the control of his Government, the oil ports in the west were controlled by illegitimate authorities.

With rival entities vying for control of the oil sector, international companies have difficulty navigating the current situation and have requested guidance from the Panel. The lack of clear indications in the relevant resolutions renders this impossible, however, given that there are no grounds for identifying with which National Oil Corporation they should engage.

The civil war in 2011 resulted in the fall of Col. Mu'ammar al-Qadhafi's regime and the gradual consolidation of control over most parts of the country by the Transitional National Council (TNC) and affiliated rebel militias. Libya's hydrocarbon exports suffered a near-total disruption during the civil war, and the minimal and sporadic production that did occur was mostly consumed domestically. In response to the loss of Libya's oil supplies in the summer of 2011 the International Energy Agency (IEA) coordinated a release of 60 million barrels of oil from the emergency stocks of its member countries through the Libya Collective Action the first such release since Hurricane Katrina in 2005.

Libya's oil production recovered in 2012, but it still remained lower than levels prior to the civil war. After the civil war ended, labor-related protests occurred sporadically at various oil fields and installations. Protests at oil fields escalated in June 2013, affecting output at some of Libya's major oil fields. In July and August, protests at key oil loading ports in the central and eastern regions, by workers and guards that were hired to protect the facilities, crippled the oil sector and led to the near-halt in production from the oil fields linked to ports after most storage tanks became full. Production at two major oil fields in the west were shut down in late August after the Zintan militia closed pipelines linking the fields to loading ports but output in the west resumed in mid-September.

After the uprising against Gaddafi, Ibrahim al-Jathran was given responsiblity for protecting the Libya's oil facilities in Cyrenaica. Before his dismissal, al-Jathran was the leader of the Petroleum Defence League (called the Petroleum Facilities Guard (PFG) by the government), in central Libya. Ibrahim al-Jathran was also the leader of striking oil workders at the biggest oil port, Es Sider. The Zueitina oil port was shut in mid-July 2013, though a second oil port, Marsa al-Brega, reopened in mid-August 2013. He ordered his militia to shut down the main oil export terminals, demanding to use the oil revenue to set up their own government administration in Cyrenaica. The militia refused to return control of the oil to the central Libyan government until they agree to autonomous power in Cyrenaica.

The blockades reduced Libya's oil output to 250,000 bpd from 1.4 million bpd in July, cutting much needed revenue for rebuilding the state. The blockade of four ports had been a key factor in keeping the price of Brent oil above $100 per barrel. Libya exported up to 3.5 million barrels of oil per day before the uprising against ousted leader Moammar Gadhafi began in February of 2011.

The Libyan military said 10 April 2014 it had regained control of Al-Hariga and Zueitina oil exporting ports in the east of the country, following days of negotiations with separatists demanding a larger share of oil revenues. Agreement by the two sides to reopen oil ports after a nine-month militia blockade was hailed as a breakthrough after a long and bitter tug-of-war. Tripoli said the blockade cost the country more than $14 billion (10.1 billion euros) in lost revenues. Libya's oil exports were likely to quadruple and hit 1 million barrels per day by mid-June after rebels ended a blockade of two terminals, OPEC Secretary General Abdullah El-Badri said 11 April 2014."I think the first one million barrels will come in two months' time, but after a million it will take some time. Because the main challenge now is the security," El-Badri said.

By mid-2013 oil exports were less than 500,000 barrels per day, compared to its capacity of 1.6 million bpd. By September 2013 Libya's oil output hit a new post-war low of just 150,000 barrels per day. Exports had fallen to just 80,000 bpd from just two offshore platforms. By late Septebmer 2013 one-third of Libyas oil production came back on line after the striking Zintan triba militia opened the valves on a critical pipeline in Western Libya, but the shutdown in Eastern Libay continued.

The eleven-month long blockade of Libyas oil facilities by federalist and tribal militias brought the countrys oil output to stop, depressing GDP by an estimated 14 percent in 2013 and a projected 20 percent in 2014. The lifting of the year-long blockade of oil facilities by federalist militias allowed oil production to rise to a reported 840,000 barrels per day from a low of 240,000 barrels per day in June 2014. Exports resumed from most terminals later in 2014. At that time, a few oil facilities remained at the mercy of un-accountable militias. Efforts to expand production were hampered by the departure of most international oil company personnel and the reduction of maintenance and capital investment.

By September 2014 Libya's oil output had risen to 725,000 barrels a day, more than six times the level two months earlier, after the rebels agreed with the central government to end a blockade of four oil ports in the east.

The western National Oil Corporation issued a statement on 27 July 2015 in which it requested the Government and other relevant institutions to take immediate action to stop the smuggling of fuel, saying that it was draining the country of its natural resources. The statement was issued after two Italians were arrested in the Dominican Republic for their involvement in a fraud relating to the sale of fuel to the Italian navy that had not been delivered. The dire economic conditions in Libya and the lack of any formal security apparatus create the ideal conditions for fuel smuggling to flourish. The town of Zuwarah on the north-western coast is one area that stands out as generating particularly high revenue.

The fuel smuggled from Zuwarah came from the Zawiyah refinery, which refines crude oil received from other Libyan terminals. Zawiyah also receives refined products from abroad that were stored there. Fuel was then distributed to suppliers in the surrounding area, but significant quantities are also sold to smugglers. The ships smuggling fuel sailed south from Malta to between 40 and 60 nautical miles off the Libyan coast, where they turn off the Automated Identification System. After they are loaded, they return to Malta. The vessels remained adrift at least 12 nautical miles off the coast, outside Maltese territorial waters, while they discharge the fuel on to other vessels that carry it to the coast. Several families run the fuel smuggling business in Zuwarah. All are or have been involved in other types of smuggling, such as of people, cigarettes or drugs.

An oil tanker left the Libyan port of Ras Lanouf for Italy on 21 Septemer 2016 with the first crude export cargo from the terminal since at least late 2014, boosting hopes of reviving Libya's battered oil output. The port manager of Ras Lanouf said a second tanker was preparing to load at the terminal, one of four seized on Sept. 11-12 by eastern Libyan forces loyal to military leader Khalifa Hifter. Libya's National Oil Corporation (NOC) welcomed a promise by Hifter's forces to allow the NOC to control the ports. It said on Wednesday that national production had risen to between 350,000 and 400,000 barrels per day (bpd) from less than 300,000 bpd earlier this month, following the change of control at the ports.




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