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No End In Sight For Libya’s Oil Struggles

Tanker

Predicting Libya’s future course is a head-scratcher for any oil analyst, things genuinely start to go steeply downhill the exact moment when some sort of trust is restored and people start dreaming about good things finally coming their way. Your humble servant, too, was surprised by the drastic turn for the worse in Libya, having predicted that the El Sharara incident would not jeopardize Libya’s future output. Well, it did, and it did so at a moment when everyone saw Libya as one of those bright OPEC spots where production growth could be possible. Despite all the international lobbying and pressure, the 315kbpd El Sharara field, Libya’s largest, remains shut since December 8, 2018 with no clear end in sight.

The Sharara and El Feel takeover seemed like straightforward extortion tactics – confronted with the prospect of seeing roughly 390kbpd of Libyan output cut off (the El Feel field depends on electricity supply from El Sharara, thus, if the latter is taken over by militiamen, El Feel goes off stream too), the government would acquiesce to tribal demands for more investment and better social services. And for quite some time it seemed that this would work – several days before Christmas, the Tripoli government claimed it had reached an agreement with representatives of the relevant militia, holding out the promise of 1 billion Libyan dinars ($700 million) spent on the improvement of social services in the south, to no avail.

Dealings with the grievances of southerners is a task that the Tripoli government might have settled – it is only understandable that people who did not receive salaries for months would not interfere with militias that assertedly act in their interests, it is only relatable that the struggling populace of the south that barely copes with the double whammy of living in a divided Libya and living in its poorer south would express its disgruntlement. However, in the past several weeks General Khalifa Haftar, leader of the Libyan National Army, got involved and the El Sharara saga took an unexpected twist, elevating it into pre-election dealbreaker category. Not only did he get involved, his army jubilantly took over the field in mid-February and has been holding it ever since, concurrently carrying out preventive airstrikes to warn off pro-Tripoli armed forces.

This should not mean that Haftar is against giving back El Sharara and El Feel to the relevant operation companies.…




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