Intelligence Briefings
Armed groups shutting down oil infrastructure and pipeline problems led to a decline in Libyan oil production by at least 400,000 b/d in less than 2 weeks.
Bullish Outlook Eases OPEC+ Decision
The first presidential elections in Libya since the peace brought the civil war to a pause in late 2020 was scheduled for the last week of December. That vote never took place. The delay of the vote was initially set for one month but now could be delayed up to six months or longer. The interim government’s mandate ended in the last week of December and no official extension of the term has been granted. Interim prime minister Abdul Hamid Dbeibah, himself one of the candidates for president, resumed holding cabinet meetings although his legal authority is now in question.
The vote delay centered around groups challenging several of the presidential candidate's eligibility. Saif al-Islam Gaddafi, the son of Libya’s former military dictator who was ousted and killed in 2011, was initially barred from running for president but Libyan courts overturned that ban. His inclusion was not well received by many who saw Gaddafi as a member of the previous regime they fought to overthrow. Dbeibah took over as interim prime minister promising not to seek the presidency but ran anyway. Khalifa Haftar, the military general whose campaign in eastern Libya was the major cause of the civil war that started in 2014, is also running. The divisive nature of the candidates and the unresolved question of the legal authority and power of the next president make the chances of having a secure election and a smooth transition very difficult. The losing side of the election will almost certainly question the legitimacy of the vote and the fragile peace could easily collapse.
This situation has already had consequences on Libya’s crude oil production, but it could get much worse. A group from within the Petroleum Facilities Guard (PFG), a domestic militia independent from the Libyan Armed Forces, shut down crude and gas pipelines from four major oil fields including Sharaha and El Feel in late December a few days before the scheduled vote. The group sought to place pressure on the government to grant them legal recognition and more investment in infrastructure. The PFG came out against this move from members within their ranks, but it is unlikely the move was an entirely rogue operation. This brought down production by 300,000 b/d. Another 200,00 b/d of crude production went offline this week as pipeline infrastructure is failing due to poor investments.
The situation will likely get worse. With no presidential elections scheduled, the legal authority of the interim government in question, and revenues collapsing as oil production falls, the ingredients for return of armed conflict are all there. The difference this time are the foreign forces involved in Libya that turned the conflict into a proxy war between geopolitical rivals. With Saudi Arabia patching its relationships with Qatar and Turkey reaching out to Gulf countries and dealing with its economic difficulties, there is less willingness to pursue another prolonged military conflict among the regional players. Should the Libyan civil war restart, international forces will more likely push for peace this time.
Libya’s crude production can swing very quickly. The graph above shows Libya’s crude production since 2011 when the conflicts began. Since the peace was brokered in late 2020, Libya’s crude production averaged 1.2 million b/d. In less than two weeks, Libya’s production fell below 800,000 b/d. This bullish development will make it easier for OPEC+ to continue the 400,000 b/d production increases in February. OPEC+ is still struggling with African members unable to raise production to meet their quotas. Although exempt from the OPEC+, Libya’s production decline only means more slack for Arab Gulf OPEC+ members to pick up.