Forces loyal to Libya’s eastern leader Khalifa Haftar have swept into the country’s lawless and oil-rich southern region to expel militants and secure energy facilities. The operation, if successful, could put Haftar in control of most of Libya’s oil fields and help rejuvenate exports from OPEC’s most unpredictable producer. But it could just as plausibly do the opposite, raising tensions and wrecking a recovery in the politically fragmented country holding Africa’s largest crude reserves.
1. What happened in southern Libya?
Haftar, commander of the self-styled Libyan National Army, announced on Tuesday that his forces have advanced into the south, home to the country’s largest oil field. His fighters said they planned to enter the region’s biggest city, Sebha, which sits 200 km (124 mi) from this field, called Sharara. The LNA, the most powerful military force in the nation, already controls major oil-exporting terminals and fields in eastern Libya.
2. What’s at stake in this operation?
The prize is a pair of oil fields that together can produce about 430,000 bpd, or close to half of Libya’s current total output of about 950,000 bpd. Sharara is run by a joint venture between Libya’s state National Oil Corp. and four international companies — Repsol SA, Total SA, OMV AG and Equinor ASA. It has a capacity of 340,000 bpd and is crucial to the nation’s oil revival. Another field nearby called El Feel, or Elephant, can pump 90,000 bpd.
Sharara stopped producing more than a month ago due to a protest by tribesmen and security guards demanding salary payments and reinforcements in the area. Looters have struck several times during the halt, affecting the field’s capacity when it finally restarts. The NOC has said it won’t resume output at Sharara without a security guarantee. That’s something Haftar may soon be in a position to provide.
3. Who wins and who loses if Haftar grabs the fields?
Haftar leads the main force opposing the United Nations-backed government of Fayez al-Sarraj in the western city of Tripoli. Backed by Russia, Egypt and the United Arab Emirates, his LNA already controls Libya’s so-called oil crescent, a coastal area containing the country’s major exporting terminals.
“If Haftar succeeds in gaining Sharara and El Feel, he will have almost total control over Libya’s onshore oil sector,” Derek Brower, a director at consultant RS Energy Group, said by phone. “For that reason alone, it’s likely that his opponents will fight hard to resist this.”
By controlling the south, Haftar would strengthen his hold on key arteries of Libya’s economy. This could complicate UN-led efforts to unify the country and hold elections.
4. What impact will this have on oil exports?
It’s still too early to say what Haftar’s southern power play will mean for Libya’s oil industry. If his previous confrontation with the Tripoli-based NOC serves as a guide, the outlook isn’t encouraging.
Most of Libya’s crude shipments were suspended for weeks last June due to a standoff between Haftar and the internationally recognized NOC headed by Mustafa Sanalla. Haftar had recaptured two important export terminals from rivals and then transferred control of those ports and three others to an oil authority in eastern Libya that lacked international recognition. Markets were deprived of some 800,000 bpd, and Libya lost $930 million in sales.
5. How did Libya reach this point of crisis?
After a NATO-backed war toppled strongman Muammar Qaddafi in 2011, militias and rival administrations in the west and east carved up Libya in fighting that has interrupted oil output and shipments.
The lack of clarity about what will happen in the south casts doubt on Libya’s plan to boost output to 2.1 MMbpd by the end of 2021. The nation’s internal turmoil led the Organization of Petroleum Exporting Countries in December to exempt Libya from participating in global production cuts.
6. Is there any cause for optimism?
In his televised speech on Tuesday, Haftar’s spokesman didn’t specify any intention for the LNA to replace the Petroleum Facilities Guard, which has been responsible for security at Sharara. But if Haftar does take control of the fields and then hands them over to the NOC, this could help stabilize Libyan production and exports. Sharara in particular has endured sporadic shutdowns in recent years, mostly from groups with financial or political grievances.
Brower of RS Energy is skeptical of a tidy outcome. “It’s unclear what Haftar will do if and when he has total control of the onshore oil sector. If he is going to push once again for eastern Libya to erect an independent oil business, this would seem to be another opportunity — and this too would risk a severe escalation of the divisions” in the country, he said. “It’s another dangerous moment for Libya.”