Islamic State, Political Instability Derails Libyan Oil Industry
Ongoing militant attacks on hydrocarbon installations in Libya have helped stem the production of oil in the country to well below pre-2011 output levels.
“Such activity, in combination with oil embargos, has contributed to an 80 percent fall in national oil output since 2011,” said Ruth Lux, a senior consultant within JLT’s credit, political & security risk division consulting team.
For most of the last two years, oil production in Libya has been stuck at around 300,000 to 400,000 barrels per day (bpd), Martijn Murphy, research manager for Wood Mackenzie’s Middle East and North Africa upstream oil and gas team, told Rigzone.
This output drop is not good news for the country considering it’s one of the most dependent oil economies in the world, according to a study by Bloomberg released in January.
Since the start of 2016, Islamic State (IS) has launched a number of attacks on Libya’s oil and gas assets.
In January, IS set fire to oil storage tanks in an assault on the Ras Lanuf terminal in northern Libya and the group is suspected to have staged an attack on a water plant near the Sarir oil field in eastern Libya in March. An attempted assault on an oil field on Apr. 2 led to the death of two guards and it was revealed on Apr. 10 that staff from three oilfields in eastern Libya had been evacuated because of fears of further attacks.
Following the latest assaults, the most senior United Nations official in Libya, Martin Kobler, said he was deeply concerned.
“The attacks of the so called Islamic State…are a serious threat to Libya’s oil installations,” said Kobler, the special representative of the secretary-general and head of the UN support mission in Libya, in an April 27 press release.
This concern was echoed by Lux, who warned that “commercial assets face a severe and rising threat, particularly in the Sirte basin.”
IS Not Seeking to Gain Control of Libyan Oil Assets
Although similar to attacks in Syria and Iraq, IS’ assault on Libyan oil and gas facilities has a different purpose, Lux explained.
“Targeting energy sector assets is a core aspect of IS’ initial strategy, designed to ensure that Libya remains a failed state and consequently vulnerable to further exploitation, as opposed to its approach in Syria and Iraq which has revolved around isolating and controlling energy facilities in order to generate revenue,” said Lux.
Murphy said the damage to facilities in Libya was opportunistic.
“There’s little prospect of IS gaining control of Libya’s oil. The attacks in January this year … demonstrated more I think the strategies about destroying Libya’s export capacity and increasingly depriving the central bank of export revenues, rather than seeking to control the ports and export crude, which I think would be a non-starter,” said Murphy.
WoodMac’s research manager also revealed that IS lacks the military capability to gain control of the country’s ports since the Libyan national army, and militias allied in the east, have significant air power which can be called upon.
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