Libya’s Oil Comeback Derailed as Former General Seizes Ports

EghtesadOnline: Libya’s plans to restore oil production suffered a significant setback after forces loyal to the eastern region’s powerful military commander ousted government-backed fighters from key export terminals, just days before a tanker was due to load the first shipment in nearly two years.

News ID: ۷۳۶۸۵۵

13 September 2016

Khalifa Haftar’s fighters took the ports of Ras Lanuf and Es Sider from Ibrahim Jadran, leader of local Petroleum Facilities Guard units, on Sunday. His forces now control shipping terminals and oil fields in Libya’s main producing region. While restrictions on crude exports mean Haftar can’t generate revenue from the assets, they afford him political leverage over the Tripoli-based Government of National Accord, reports Bloomberg.

“It’s an important development that strengthens Haftar’s position,” said Richard Mallinson, an analyst at Energy Aspects Ltd. in London. “It’s a real challenge for the GNA how it responds to Haftar’s move -- does it try and negotiate a compromise and try to offer him the position of defense minister, which it wasn’t willing to do in the past, or do GNA forces try to challenge him. Either way, it’s hard to see a way this supports the stabilization of Libya, or a resumption of exports.”

Libya has splintered since fighters from different regions came together five years ago to oust Moammar Qaddafi. Armed groups now compete for control of Africa’s largest crude reserves, source of more than 95 percent of the country’s export revenue prior to 2011. Prime Minister Fayez al-Sarraj’s GNA has been attempting to increase output -- currently less than a quarter of pre-war levels -- to revive the economy and boost efforts to unite the country after a United Nations-brokered peace deal in December.

Controversial Deal

In July the Tripoli-based unity government reached a controversial deal to pay salaries to PFG members in exchange for reopening Es Sider, Ras Lanuf and a third oil port called Zueitina. The agreement set a “terrible precedent” and invited extortion by militias, National Oil Corp. Chairman Mustafa Sanalla said at the time.

Authorities had started to repair damage to the ports and begin maintenance in order to boost production by more than 900,000 barrels a day by the end of the year. On Sept. 18, Ras Lanuf was expected to load its first crude cargo since Dec. 2014.

“Haftar’s move kills off the July deal,” Mallinson said. The force majeure at the ports -- a legal clause that allows companies to halt shipments without breaching contracts -- are now unlikely to be lifted, he said.

Long-Running Dispute

Output from Libya is likely to stay at 300,000 barrels a day or lower until year-end at least, as there is likely to be yet another long-running dispute over who is entitled to sell Libya’s crude exports, Audrey Dubois-Hebert, an analyst at FGE, said in an e-mailed note. There is also a risk of further damage to the export terminals if fighting continues.

Haftar, a former general in the Qaddafi regime who later fled the country, doesn’t recognize the GNA and has been consolidating his authority over territory in the east including some oil facilities and Benghazi, the main city in the region.

The operation to seize the two oil ports was intended to push out militias who were stealing the nation’s wealth, said Colonel Ahmed al-Masmari, a spokesman for Haftar’s forces. Libya’s NOC confirmed the seizure without commenting further. Photos posted on Facebook showed units from Haftar’s self-proclaimed Libyan National Army celebrating victory at checkpoints on the coastal road.

Losing Control

The Presidential Council -- the leadership committee of the GNA -- called on allied fighters to retake the terminals.

“The seizure of the ports is by no means definitive, we should expect more fighting,” said Mattia Toaldo, senior policy fellow at the European Council on Foreign Relations. “For Jadran it is an existential battle and he’s likely to ask for help from Defense Minister Bargathi, who is a close ally.”

Toaldo said he wouldn’t rule out the possibility of Haftar coming to some kind of deal with the NOC, since his forces already control the eastern port of Hariga and allow the state-run company to continue exports. The crucial factor will be whether leaders in the west would allow the former general to gain the kind of political leverage that controlling those ports would provide, he said.