Protests aimed at Libya’s oil sector have cost the country more than $7 billion since they began this past summer, according to statements by Oil Minister Abdelbari al-Arusi on Saturday. Production has fallen to between 225,000 and 250,000 barrels per day, down from 1.4 million barrels per day in July, with half going to feed the Zawiya refinery for domestic consumption. This leaves a mere 130,000 barrels per day for export, putting significant pressure on the country’s finances.
The government is having trouble drafting its 2014 budget because of this unpredictability and the significant drop in oil revenue. Due to a tightening of government funds, the deputy governor of Libya’s central bank, Ali Mohamed Salem El-Hebri, confirmed that the central government has dipped into its foreign currency reserves. The government has used $7 billion in reserves so far and plans to use $6 billion more to compensate for the economic damage caused by oil export disruptions. Tripoli can only draw on these reserves for so long, so regaining control of its oil export terminals and re-establishing its pre-crisis oil sales are a top priority.
According to Reuters, “only the El-Feel field, offshore operations and fields belonging to state-owned Sirte Oil Co in central Libya were still producing oil.” At the OPEC meeting in Vienna on Wednesday, Arusi told reporters that he hoped to restore production to full levels within ten days, saying, “in 10 days if everything goes right, hopefully we’ll go back to 1.5 million barrels per day.” However, this ten-day figure was not mentioned again on Saturday, which indicates that Tripoli is likely pushing back its timelines.
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Restoring production is only part of the battle. In the wake of Libya’s production crisis, other OPEC members stepped up production and replaced Libyan supply with its traditional customers. “We are facing a big problem because oil from Algeria and oil from Nigeria has entered the Mediterranean [market],” Arusi said. “We have started looking for new markets in East Asia to offset the loss.” Libya will have to work hard to prove that it is a stable source of crude for its customers, which means first quelling the domestic upheaval.
The issue is that Tripoli cannot take a single action to appease the protesters because they are not a monolithic group. Militants in the east seek regional autonomy, civil servants seek pay, and ethnic minorities like the Berbers seek official language recognition. What unifies these groups is their tactics, which take aim at Libya’s vulnerable oil industry. The resulting fuel shortages have caused electricity outages in some major cities, hurting public opinion toward the goals of the protesters. An Islamic group took aim at these tactics, demanding the opening of oil ports in Benghazi on Friday. “We demand the liberation of oil exports,” read one of the banners they were flying, and one of the group’s leaders accused strikers of hurting the Libyan economy and its citizens.
The chances of the world seeing 1.5 million barrels per day flowing out of Libya within the ten-day window are remote at best, but Tripoli is running out of time. The government cannot run on currency reserves forever and the longer Libya’s oil industry is out of commission the harder it will be to restart its oil sales when the crude finally begins to flow freely again.
By. Rory Johnston