Arab Today, arab today libya oil crisis imperils badly needed investment in energy
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Arab Today, arab today
Arab Today, arab today

Libya oil crisis imperils badly needed investment in energy

Arab Today, arab today

Arab Today, arab today Libya oil crisis imperils badly needed investment in energy

Tripoli - UPI

Libya\'s seemingly endless security crisis has crippled its all-important energy sector, slashing production from 1.4 million barrels per day to as little as 250,000 bpd, and has driven off urgently needed foreign investment to develop Libya\'s battered oil sector. The situation is expected to improve in coming weeks as some oil fields in western Libya are reopened. But, despite some market optimism, the core issues remain unresolved and trouble could well flare again. Industry sources say production could climb back to 700,000 bpd -- about half Libya\'s output earlier in the year -- as militias and protesters who virtually shut down the industry negotiate settlements with the beleaguered central government in Tripoli. Officials said the port at Zawiya, 35 miles west of Tripoli, exported 700,000 barrels to Spain a few days ago, its first crude shipment since Aug. 29. Other terminals and offshore loading platforms at Zawiya, Brega, al-Jurf and Bouri are also functioning. But the two most important ports, Es Sider and Ras Lanuf in the rebellious east, remain closed, as are Hariga and Zueitina, officials reported. Es Sider, Libya\'s largest terminal with a capacity of 350,000 bpd, was shut down July 28. What progress there has been is largely restricted to the west, the Tripolitania region where the shaky interim government of Prime Minister Ali Zeidan has some influence. But even there he\'s under pressure to resign. In the eastern Cyrenaica region around Benghazi, cradle of the 2011 revolution against longtime dictator Moammar Gadhafi, hardline Islamists demand more autonomy and regional control of the oil revenues. The big oil fields and oil terminals in the east, traditional rival of the western Tripolitania region, remain inactive. Regionalist sentiment is high too in the southern desert region of Fezzan. The protesters include several armed regional militias, who call themselves \"revolutionary brigades,\" and even elements of the Petroleum Facilities Guards who are supposed to protect the installations they\'ve shut down and oil and gas workers\' unions. \"Libya\'s essentially beholden to local and regional interest groups,\" said Henry Smith of the London-based Control Risks consultancy. \"The government doesn\'t really have the coercive capacity to stop them.\" Amid the anarchy that still grips Libya following the overthrow of Gadhafi in August 2011 and his death two months later by a revolutionary mob, there\'s little the government can do except negotiate. And its options are limited even on that score. The protesters either want more regional autonomy, including control over the revenue-spinning oil fields, pipelines and export terminals strung along the Mediterranean coast, or better pay and management. Zeidan\'s problem-plagued administration is in no position to move against the troublemakers with force because it doesn\'t have the firepower. And even if it could, observed Oxford Analytica, \"that would only provide a temporary solution to the oil production and export issue, displacing but not resolving the underlying political problems .... quite apart from potential damage to the oil facilities.\" So it\'s negotiating through a crisis committee, \"but the number of demands and the weakness of the central government will delay resolutions.\" There are widespread concerns that the shutdowns will cause long-term technical damage to the oil sector. But the crisis is also jeopardizing investment in developing new fields and upgrading existing infrastructure at a time, Oxford Analytica observed, \"when returns are no longer assured.\" International companies that operated in Libya under Gadhafi\'s erratic rule, such as Eni of Italy, Repsol of Spain and Austria\'s OMV, have invested heavily in the oil sector and are likely to remain, but will no doubt hesitate before investing further. \"Oil companies that have yet to commit significant capital, such as BP -- which is planning to drill offshore in 2014 -- will postpone major decisions,\" Oxford Analytica observed. \"BP\'s Libya involvement is seen as a bellwether for the oil industry in the country and could prompt wider investor concerns if it were to withdraw completely. Even though Libya has the largest oil reserves in Africa, 76.4 billion barrels, OA warned that \"existing and potential investors alike are likely to proceed very cautiously, awaiting greater political stability and a more secure operating environment, as there is a risk that the country could still face another cycle of demands and extortion.

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