assessments

Apr 7, 2014 | 18:18 GMT

5 mins read

Libya Makes Tentative Steps Toward Restarting Oil Production

Libya Makes Tentative Steps Toward Restarting Oil Production
(MAHMUD TURKIA/AFP/Getty Images)
Summary

A preliminary agreement to restart oil production was reached in Tripoli on April 6. Ibrahim Jadhran, the leader of the blockade that has kept Libya's eastern oil terminals offline since August 2013, announced an accord with members of the embattled national government, ending nearly eight months of stalemate. Any deal that could see the majority of Libyan oil exports return to global markets will be significant for both international trade and Libya's domestic economy, which relies almost completely on oil revenue.

Although Jadhran, his designated political representatives and some members of Libya's national government are heralding the April 6 agreement as a road to reconciliation, many challenges still remain before Libya can return to stable, sustainable levels of production resembling the post-revolutionary gains seen in 2012.

Jadhran, a former revolutionary who became a regional commander of Libya's Petroleum Facilities Guards before commandeering the eastern oil blockades he was sent to quash, has been frustrating Libyan national authorities for the better part of a year. Holding Libya's critical oil export infrastructure hostage, Jadhran's strategic position evolved into a political platform from which he has advocated greater regional oversight of government oil sales, a federalized political model and increased distribution of state oil revenues to the individual regional governments in Libya.

Libya's Urban and Rural Power Centers

Libya's Urban and Rural Power Centers

The eastern region's tribal and local elders stepped in to broker the interim agreement between Jadhran and Tripoli, with the central government stressing that it was not involved in direct negotiations with Jadhran or his appointed political committee. Any agreement hinges on Jadhran allowing the ports of Hariga and Zueitina to reopen, with potential exports totaling around 200,000 barrels per day. Coming weeks would require further negotiations before terminals at Ras Lanuf and Es Sider could come back online. In exchange for his show of good faith, Jadhran's forces would be exempt from prosecution in addition to receiving several months' worth of back pay commensurate with their status as former government employees. There are also stipulations regarding the creation of a Ministry of Justice oversight committee, designed to monitor administrative and financial compensation related to the Libyan oil sector since the fall of Moammar Gadhafi in October 2011.

Barriers to Progress

One of the biggest potential obstacles to such a deal will be the ongoing reluctance of many within the national government in Tripoli to publicly acknowledge or validate the negotiations between Jadhran, regional elders and some members of the nominal national authority. Though a copy of the agreement was posted on the Office of the Prime Minister's website April 6, the prime minister, the president of the General National Congress and the oil minister have yet to release public statements recognizing or confirming the interim deal.

The facility manager at Hariga port confirmed to state media April 7 that he has received no instructions from the central government to restart oil exports and that essential maintenance would delay exports for around 10-14 days from the date such orders were received. Given the number of announced or impending deals surrounding the eastern oil terminal blockade that proved false in the past several months, the absence of high-level confirmation is a cause for concern. Several members of the General National Congress maintain that the government is not a direct party to these talks. This casts doubt on a statement released by the Office of the Prime Minister on April 3, showing a facsimile of a signed document listing the six key agreements of negotiations. These agreements include back pay for Jadhran's forces, legal immunity and a timetable for future negotiations with other ports.

The need for isolation from such a deal is clear, given the fractious infighting that has dominated Libyan politics since 2013. Competitors to Jadhran's bid for regional leadership in eastern Libya will oppose any deal that sees Tripoli grant Jadhran greater recognition. Additionally, several political elements in western Libya, including the powerful regional militia councils in Misrata and Zentan, are strongly opposed to any arrangement that would move the central government toward recognizing a federalist structure — one of Jadhran's key demands.

Part of the interim deal will also have the existing Petroleum Facilities Guards' headquarters moved to Brega in eastern Libya. This move, or even the possibility that Jadhran's fighters would be reintegrated with Jadhran emerging as the group's leader, has angered the larger body of the Petroleum Facilities Guards, which has announced its stern opposition to any proposed changes. These forces are currently protecting the oil fields that supply the eastern oil terminals Jadhran's forces are occupying, affording the Petroleum Facilities Guards the leverage to demonstrate their displeasure if such a deal went through.

Libya's Ethnic Groups

Libya's Ethnic Groups

The best-case scenario for Tripoli is a successful negotiation with Jadhran that sees his forces peacefully leave the eastern oil terminals, followed by a slow but steady resumption of oil production and exports. But given regional and national sensitivities and the strategic value in controlling the flow of oil, Tripoli is likely to replace Jadhran's singular negotiating party with a mixture of varied ethnic, tribal and regional political interests, mirroring the discordant and difficult task Tripoli faces in managing oil strikes and production shutoffs.

Even if armed forces loyal to the government were able to successfully defend Libya's eastern oil terminals from future occupation, the protesters' tactics would likely shift from peacefully keeping oil offline to violent attacks aimed at damaging oil infrastructure or preventing workers at energy facilities from doing their jobs. Though negotiations for a larger deal with Jadhran may be forthcoming, allowing some quantities of crude oil to leave Libya's eastern oil ports in coming weeks, enforcing and maintaining such a deal will be contentious and difficult. There is significant potential that Libya could return to a pattern of frequent restarts, delays and protests, as seen in the weeks leading up to Jadhran's occupation of the oil fields in August.

Connected Content

Regions & Countries

Article Search

Copyright © Stratfor Enterprises, LLC. All rights reserved.

Stratfor Worldview

OUR COMMITMENT

To empower members to confidently understand and navigate a continuously changing and complex global environment.

GET THE MOBILE APPGoogle Play