El Sharara remains closed

Libyans remain divided on when to restart the El Sharara oilfield, the country’s biggest, after closure due to the presence of militants. 

Background 

The El Sharara oil field is located in Murzuq Desert. It was discovered in 1980 and developed by Petrom. The oil field is operated and owned by Repsol. The total proven reserves of the El Sharara are 3 billion barrels (403×106tonnes), and production is centred on 300,000 barrels per day (48,000 m3/d).

In December 2018, the state guards and tribesmen seized the oil fields to protest at economic conditions and frequent power outages. In January, the Libyan National Army, which is based in eastern Libya, started an offensive to secure El Sharara and nearby El Feel oilfields and fight militants in the south.  In February it sent a force to the field and last week handed control of it to the same oil security force that had been responsible for the closure, after holding negotiations with them over their demands. 

The field remains under force majeure, a legal status protecting a party from liability if it can’t fulfil a contract for reasons beyond its control.

Analysis 

A meeting between Libya’s top oil executive and prime minister in Abu Dhabi ended without a clear agreement on when to restart the country’s biggest oil field.

Tripoli-based Prime Minister Fayez al-Serraj’s office said in a statement that an agreement was reached that could end the halt. Mustafa Sanalla, chairman of Libya’s National Oil Corp., reiterated his position that “force majeure” can’t be lifted until all militants leave the deposit. The impasse over Sharara has entered its third month and Libya’s National Oil Corporation (NOC), which refuses to yield to ransom demands, said that “Oil production will now only restart at Sharara after alternative security arrangements are put in place.”  

“The field is closed because of the presence of a group of civilians, this armed militia, and some military people with them,” the NOC chairman said 

Libya, one of the most politically fragmented members of OPEC, has endured major oil disruptions, and multiple battles and blockades have hindered efforts to revive output. 

Haftar has gained control of much of eastern Libya with the help of Russia, neighbouring Egypt, and the United Arab Emirates (UAE), among other countries.UAE is the biggest backer of Khalifa Haftar, a key figure and commander of the Libyan National Army (LNA) force, which this month took control of two oilfields in Libya’s south, El Sharara and the nearby El Feel facility. 

The United Arab Emirates brought together players in Libya’s conflict and the state oil firm to try to reopen the oilfield. Libyan officials meeting in Abu Dhabi agreed to coordinate the evacuation of some groups from the field and hand over control of the area to the National Oil Corp., according to the prime minister’s statement. The NOC’s Sanalla said the company wants assurances from Haftar that arrest warrants will be served and wanted individuals will be removed from the field. NOC said in a statement Sanalla would meet unidentified Libyan players to “discuss security measures necessary to find a solution to the Sharara crisis, that guarantee staff safety, and pave the way for the lifting of force majeure at the field.”

The fighting has the potential to disrupt the UN’s long prepared plans to convene a national conference, possibly next month, that is supposed to lead to either parliamentary or presidential elections and a new constitution. Plans to hold a national conference to decide on the format of elections has met the resistance of Haftar’s supporters who feel emboldened by recent military progress. The LNA already secures oil ports in eastern Libya, forcing NOC to work with Haftar, Murzuq was also "strategic" for the LNA because it was a hub for the Tabu tribesmen, who oppose Haftar, and are a "connecting link between Libya, Niger, and Chad". 

Despite the assurance that Sharara is secure and ready to restart, Sanalla said the NOC’s safety concerns haven’t been addressed. The security forces currently protecting the field are the same guards who have “committed violent and terrorizing acts against workers,” he said.

Assessment 

Our assessment is that Libya descended into chaos after the U.S.- and NATO-backed overthrow of dictator Muammar Gaddafi in 2011. In the aftermath, it became a fertile ground for the likes of ISIS and al-Qaeda. It can be noted that the present leader of LNA served under Gaddafi before going into exile in the US.  We feel that Libyans will bear the brunt of the ongoing conflict for power.

1.Libya cut oil output by half