New Attacks on Libya’s Oil Assets Shake Nation’s Stability, Energy Markets
March 8, 2015 2:43 p.m. ET
Wall Street Journal
Deadly attacks on Libyan oil installations in recent days have resulted in what could be long-lasting damage to the industry that affects oil markets and alters the battle for dominance in the country.
Western and Libyan officials said they suspected the Libyan affiliate of Islamic State, the radical group that has taken over parts of Iraq and Syria, was responsible for assaults on Friday that left at least eight people dead and seven foreign workers missing.
The attacks targeting oil fields and their employees point to a new pattern in Libya’s violence: Lacking the strength and expertise to capture and use oil installations, militant groups are destroying them to prevent rivals from profiting from the oil.
Islamic State’s “engagement with Libya’s hydrocarbons sector is not about capturing fields,” said Geoff Porter, an assistant professor with the Combating Terrorism Center at the U.S. Military Academy in West Point, N.Y. “It’s about destroying the fields to destroy the revenue.”
The country is now divided between Libya Dawn, the Islamist militia that controls Tripoli, and its rivals in the eastern city of Tobruk.
Libya relies on oil for most of its revenue, and with the destruction of oil-extraction infrastructure, the country’s fragile government institutions—the remaining scaffolding of a unified state—face the threat of collapse.
Last week’s attacks struck some of the nation’s most productive fields in the Sirte region of central Libya, home to half of the country’s oil export capacity and its most prolific reserves. They had been hit before, but not with the same effect.
Storage tanks, a control room and a drilling rig at a French-Libyan field called Mabruk are inoperable after the latest round of strikes, according to an official there. It could take up to a year for production to return to normal, the official said.
A spokesman for Libya’s National Oil Co. said it was impossible to say how long it would take to restart production because no one was able to go to the field. The company pulled its staff from the Sirte region after declaring force majeure for the area last week, giving the government legal protections from claims against any future disruptions.
The fields that were attacked in Sirte are responsible for about a third of the country’s capacity to produce about 1.5 million barrels oil a day.
Libya, with the largest oil reserves in Africa, has watched its petroleum industry’s production seesaw since the war that resulted in the overthrow and death of dictator Moammar Gadhafi in 2011.
“We don’t know if they were killed, kidnapped or released,” a spokesman for Libya’s National Oil Co. said.
Austria’s foreign ministry said Sunday it had no contact with the missing men and named their employer as contractor VAOS, according to the Associated Press. VAOS didn’t respond to a request to comment.
While no one claimed responsibility for the disappearances, Western and Libyan security officials said Islamic State is hoping to raise fresh funds by kidnapping foreign oil workers.
European Union officials have said they would step up their role in Libya, but only if a unity government could be achieved.
With the global oil market oversupplied and prices about 40% off their 2014 highs, markets have begun to take notice. Oil prices rose after the attacks in Libya and after Islamic State militants burned oil wells at the Ajeel field in Western Iraq.
“We expect jihadist attacks on the oil infrastructure to intensify over the next several weeks and to inflict damage,” said New York-based risk consultancy Eurasia Group. The consultancy expects “no short-term recovery in oil exports” with a potential upside only for 2016.
Last year, the International Energy Agency said Middle-East and North African producers need to spend $90 billion through 2025 to meet global demand for their oil. But it warned that political risks, which have now intensified, may make achieving that goal impossible.
The disappearance of at least seven foreign workers, including a Czech and an Austrian citizen working for a foreign pipelines contractor, over the weekend has added a new element to the unrest. Mounting insecurity could make it impossible to bring in specialized foreign technicians needed to perform maintenance on wells, according to a Libyan official.
Write to Benoit Faucon at benoit.faucon@wsj.com and Matt Bradley at matt.bradley@wsj.com
Wall Street Journal
Deadly attacks on Libyan oil installations in recent days have resulted in what could be long-lasting damage to the industry that affects oil markets and alters the battle for dominance in the country.
Western and Libyan officials said they suspected the Libyan affiliate of Islamic State, the radical group that has taken over parts of Iraq and Syria, was responsible for assaults on Friday that left at least eight people dead and seven foreign workers missing.
The attacks targeting oil fields and their employees point to a new pattern in Libya’s violence: Lacking the strength and expertise to capture and use oil installations, militant groups are destroying them to prevent rivals from profiting from the oil.
Islamic State’s “engagement with Libya’s hydrocarbons sector is not about capturing fields,” said Geoff Porter, an assistant professor with the Combating Terrorism Center at the U.S. Military Academy in West Point, N.Y. “It’s about destroying the fields to destroy the revenue.”
The country is now divided between Libya Dawn, the Islamist militia that controls Tripoli, and its rivals in the eastern city of Tobruk.
Libya relies on oil for most of its revenue, and with the destruction of oil-extraction infrastructure, the country’s fragile government institutions—the remaining scaffolding of a unified state—face the threat of collapse.
Last week’s attacks struck some of the nation’s most productive fields in the Sirte region of central Libya, home to half of the country’s oil export capacity and its most prolific reserves. They had been hit before, but not with the same effect.
Storage tanks, a control room and a drilling rig at a French-Libyan field called Mabruk are inoperable after the latest round of strikes, according to an official there. It could take up to a year for production to return to normal, the official said.
A spokesman for Libya’s National Oil Co. said it was impossible to say how long it would take to restart production because no one was able to go to the field. The company pulled its staff from the Sirte region after declaring force majeure for the area last week, giving the government legal protections from claims against any future disruptions.
The fields that were attacked in Sirte are responsible for about a third of the country’s capacity to produce about 1.5 million barrels oil a day.
Libya, with the largest oil reserves in Africa, has watched its petroleum industry’s production seesaw since the war that resulted in the overthrow and death of dictator Moammar Gadhafi in 2011.
“We don’t know if they were killed, kidnapped or released,” a spokesman for Libya’s National Oil Co. said.
Austria’s foreign ministry said Sunday it had no contact with the missing men and named their employer as contractor VAOS, according to the Associated Press. VAOS didn’t respond to a request to comment.
While no one claimed responsibility for the disappearances, Western and Libyan security officials said Islamic State is hoping to raise fresh funds by kidnapping foreign oil workers.
European Union officials have said they would step up their role in Libya, but only if a unity government could be achieved.
With the global oil market oversupplied and prices about 40% off their 2014 highs, markets have begun to take notice. Oil prices rose after the attacks in Libya and after Islamic State militants burned oil wells at the Ajeel field in Western Iraq.
“We expect jihadist attacks on the oil infrastructure to intensify over the next several weeks and to inflict damage,” said New York-based risk consultancy Eurasia Group. The consultancy expects “no short-term recovery in oil exports” with a potential upside only for 2016.
Last year, the International Energy Agency said Middle-East and North African producers need to spend $90 billion through 2025 to meet global demand for their oil. But it warned that political risks, which have now intensified, may make achieving that goal impossible.
The disappearance of at least seven foreign workers, including a Czech and an Austrian citizen working for a foreign pipelines contractor, over the weekend has added a new element to the unrest. Mounting insecurity could make it impossible to bring in specialized foreign technicians needed to perform maintenance on wells, according to a Libyan official.
Write to Benoit Faucon at benoit.faucon@wsj.com and Matt Bradley at matt.bradley@wsj.com
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