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Andy Tully

Andy Tully

Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com

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Is ISIS Trying To Seize Libyan Oil Assets?

The Islamic State appears to be trying to add Libyan oil to its source of funding, now that its control of energy outlets in Iraq and Syria are no longer uncontested.

Attackers set fire on Monday to a crude oil storage tank linked to the Ras Lanuf oil facility, and car bombs were detonated at the entry to the oil port of Es Sider, according to a spokesman for the country’s National Oil Co. Both targets are key oil ports on the coast of Libya’s Bay of Sidra, about 400 miles east of the country's historic capital, Tripoli.

The spokesman said he could not identify those responsible for the attacks, but two other people, identified by The Wall Street Journal only as Libyan officials, blamed fighters of the Islamic State, also known as ISIS, ISIL and Daesh. The group has a strong presence in the two cities. Related: Middle East Tension Won’t Rescue Oil Prices

The reason for the attacks appears clear. The Islamic State has been financing its operations in large part by seizing oil production centers in Iraq and Syria, but the effort has been undermined by repeated air attacks from U.S.-led coalition in the region. IS now appears to be turning to Libya as a fresh source of funds.

Ras Lanuf and Es Sider are good places to start. Together the ports have a capacity to ship nearly half of the more than 1.6 million barrels a day that, in peacetime, Libya is capable of producing, though they have been shut down for more than a year. Libya’s output now is less than one-fourth of that amount.

The country has been torn by civil war since its former leader, Col. Muammar Gadhafi, was toppled and killed in 2011. Two governments – one based in Tripoli and the other in Bayda in the east – and are vying to control the country and its huge oil reserves. Related: Panic In Chinese Markets Has Commodity Traders On Edge

Recently, however, they signed a power-sharing agreement, brokered by Morocco, that would set up a unity government by mid-January. But it’s not clear whether the two sides will cooperate and, even if they do, they can restore Libya’s oil production to the levels before Gadhafi’s death.

Meanwhile, the West reportedly plans a major offensive in Libya to defeat IS, or at least to deprive it of oil financing. Britain’s Daily Mirror reports that units of the Special Air Service (SAS), the kingdom’s special military force, have been sent to Libya to prepare for the arrival of about 6,000 Western soldiers and marines, including from Britain, France and the United States and led by Italy.

The Western offensive is expected to begin within the next several weeks, the newspaper reported Sunday. Related: Saudi-Iran Dispute Won’t Cause Lasting Oil Price Rally

The Mirror said IS’ chief goal is Libya’s Marsa al Brega oil refinery, also on the Gulf of Sidra, about 50 miles east of Ras Lanuf and the largest such facility in North Africa. This would give the militants control of most of the country’s oil wealth.

The article said SAS forces are advising Libyan commanders on battlefield tactics, and are gathering intelligence on the military situation in the country to Britain’s chief of joint operations, Lt. Gen. John Lorimer, so he can decide whether to request the presence of more warplanes of the Royal Air Force (RAF) in nearby Cyprus, which serves as an RAF base for the kingdom’s operations in Iraq and Syria.

By Andy Tully of Oilprice.com

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