Tag Archives: NTC

Libya and An Energy Return to Normalcy

Far exceeding the expectations of international observers, Libya’s energy production levels have moved closer to an expected return to pre-conflict levels by as early as Spring 2012. However, issues of security and new governance have threatened to slow the process when the country needs new revenue most.

After grinding to an almost complete halt amid violence between loyalists troops and anti-Muammar Gadaffi forces earlier this year, Libya’s hydrocarbon efforts have shown significant signs of life following the death of the country’s long-standing leader. Although estimates vary, a return to the country’s pre-conflict level of 1.6 million bpd from a current output of 840,000 bpd seems much more likely goal by the end of 2012, though some have suggested it could come even earlier. Nasser el-Ghali Sharif, chairman of the Zawiya oil refinery west of Tripoli, told the BBC that full production could come as early as March.

The amended production estimates come as members of the Libya’s National Oil Company have discovered that the country’s vital energy infrastructure has been left far less damaged than once feared. With some exceptions, the North African nation’s upstream operations emerged largely unscathed from the eight-month civil war as both sides realized their importance and made efforts to protect them. Some downstream sites, including the Es Sider crude export terminal at As Sidrah did not fare as well with authorities estimating a year’s worth of work before it can get back to acceptable levels, according to the Eurasia Review.

However, any significant return to the country’s pre-civil war output levels will face obstacles over the coming months in the form of security challenges and the government’s efforts to balance progress with a new level of transparency and accountability expected from a post-Gadaffi era.

While undoubtedly calmer than when air-strikes and direct military attacks halted production all together and forced mass evacuations of expatriate staff members, Libya’s security situation remains an obstacle for many international companies hoping to return. Although some companies have restarted existing projects, led by France’s Total and Italy’s Eni in September, others have hesitated at the prospect of still armed rebel groups and sporadic threats from former government loyalists. The assurance of general security has emerged as a vital step that needs to be achieved for both the country’s Transitional National Council (TNC) and foreign firms before new efforts can be pursued.

The ability to ensure a healthy environment for such international partnerships has emerged as an especially important goal as infrastructure deficits become clear, requiring substantial investment contributions in order to get production efforts back on line. In addition to establishing dialogues with international firms, the TNC have set out to build stronger ties with regional neighbors, including those they have recently found themselves at odds with. After questions of support arose during Libya’s armed conflict earlier this year, with the NTC accusing the Algerian government of siding with the Gadaffi government, representatives from Algiers and Tripoli met at the Gas Exporting Countries Forum (GECF) late last month for the first time, signaling greater cooperation between the two countries. This week saw NTC Chairman and head of Libya’s care-taker government Mustafa Abdel Jalil announce that he would travel to Algeria over the next month to help build on regional cooperation efforts.

The Cost of Good Governance

Once those partnerships are pursued and repaired, they will still face the newly evident obstacle of addressing the NTC’s pledges of transparency and accountability when it comes to agreeing on new and existing exploration and production contracts. Intent on distancing themselves from the corruption and cronyism that came to define the energy sector under Gadaffi, the NTC have worked to create a system that balances clarity, progress and general support for firms from countries that supported their anti-Gadaffi campaign, often with frustrating results.

While insisting that all existing contracts will be reviewed and considered, the NTC has again stated that they would be unlikely to support contracts with companies from countries that did not support them, including Russia, China and Germany. According to Reuters, the country’s National Oil Company has continued to revise deadlines and requirements for traders and international firms intent on accessing Africa’s largest proven reserves, leading some to accuse them of “back-trading” and taking advantage of the enormous interest in entering Libyan fields.

“They are surfing the wave. Everyone is knocking on their doors,” a senior oil-trading source told Reuters.

Further complicating the issue is criticism coming from within Libya that argues that the NTC and current energy ministers lack the authority to sign off on or close any contracts as they are an unelected, temporary government body.

“They are a caretaker government… They don’t have the mandate, the right, the ability to engage in any major signing of contracts for oil fields,” Sami Zaptia, the managing director of Know Libya, a consultancy in Tripoli told the BBC.

With months left before national elections have been planned or even hoped for, the NTC and current energy leadership are faced with the predicament of moving Libya’s energy industry forward in a way that ensures much needed national revenue but without over-extending their authority or giving reform-minded critics any cause for concern.

Image: Reuters

 

 

 

 

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