Today at 14:00 GMT Muhamed Jibril, the Prime Minister of the Libyan National Transitional Council, officially declared the liberation of the country after an eight-month revolutionary war brought the 42 year reign of Muammar Gaddafi to an end.
The conflict – heavily supported by NATO countries stretching the interpretation of their UN mandate to protect civilians – is estimated to have claimed 45,000 casualties on all sides.
Prime Minister Mahmoud Jibril told delegates at the World Economic Forum’s regional meeting that he was resigning in favour of a transitional government and that elections should be held in eight months. He warned that there was “very limited opportunity” to unite the country behind liberation and resolve regional differences.
A new transitional government will face myriad problems – not the least of which will be to coax a militarised and fractious population to give up its huge weapons cache – and a key concern will be the ongoing rehabilitation of the nation’s oil industry, which accounted for over 95% of national revenue before the war.
The end of the conflict signals a mixed picture for Libya’s oil industry, which has recovered production strongly over the last two months, but which faces serious security, technical and logistical problems – not to mention significant political risk – in path back to pre-war levels of production.
The dramatic and bloody endgame in Sirte, which included the apparent summary execution of Gaddafi and his son Mutassim in graphic videos quickly viewed around the world, may reduce the chances of an ongoing campaign of sporadic fighting and sabotage of a kind seen in Iraq, as with the fall of Bani Walid and Sirte, no pocket of pro-Gaddafi fighters remain. Sirte in paricular has been gutted by artillery fire and will need to be rebuilt almost completely.
The demise of Gaddafi “will improve transport to fields and we can now concentrate on rebuilding the sector,” said NTC oil chief Nouri Buerrien, speaking in an interview with Reuters. Buerrien said national oil production is now at 430,000 bpd.
An investors’ note by Barclays Capital played down the impact of Gaddafi’s death. “The death of Gaddafi changes very little in the underlying dynamics of the oil picture on the ground,” said the bank in a report to investors released on Thursday.
The report branded the path back to pre-war production levels “treacherous,” emphasizing the considerable political, social and security risk of returning to operations.
There are also technical challenges. Libya’s oil fields are mature or past maturity, and several required injections of water or gas to maintain reservoir pressure. The taps were switched off suddenly six months ago and the impact of this sudden loss of pressure is not yet known.
Downstream and export facilities will also take time to catch up to the level of upstream production. Es Sider, at 447,000 bpd by far the country’s largest oil terminal, saw fierce fighting and is likely to be down for at least a year, according to Buerrien.
While some of the early backers of the NTC – most notably Eni – are bullish on oil and gas production, Austrian oil firm OMV is facing a tricky return to the country. The firm fears that widespread looting at its facilities will make a return to pre-war production difficult.
Chief executive Gerhard Roiss told investors on Friday “it is too early to say today what the situation is like at the oil fields, they are 500 km, 800 km away in the central part of the country, which is still partly being fought over,” according to a Reuters report. Roiss visited Tripoli recently but was unable to gain access to OMV’s Shatirah field. Which accounted for around 10% of the firm’s revenue.
The manner of Gaddafi’s death and the volume of weaponry in the hands of untrained irregulars also gives rise to new questions about whether the transition to a representative government under a new constitution is as clear as Jibril claims.
The NTC has been comprised of defectors from the Gaddafi regime, technocrats from Benghazi and Western-educated exiles, none of whom can claim to be representative of Libya as a whole or the various tribes that allied to fight pro-Gaddafi forces.
Barclays Capital spelled out the political risk succinctly: “There is no parliament, no constitution, and virtually no civil society organizations, and the Libyan military is riddled with tribal and regional divisions.
Hence, the potential for a security and political vacuum in Libya continues to be elevated, in our view.”
The NOC has also made it clear that it is willing to reappraise contracts made between oil companies and the Gaddafi regime. According to Reuters, Gazprom was scheduled to meet with the National Oil Company on Thursday for a dressing down after the NOC revealed that the Russian gas giant had failed to honour part of the public spending commitment in its contract. The meeting was postponed on news of Gaddafi’s death.
