Oil firms look set to pull out of Libya

12 September 2013

Prolonged production outages at the country’s oil facilities could push foreign oil firms to back out of Libya

Libya’s oil sector is in the midst of its biggest crisis since its civil war in 2011. Protests and industrial action at its major export terminals and refineries since the end of May have effectively shut down production, costing the country more than $5bn in lost revenues. The central government now faces a revenue shortfall, just as it needs to ramp up spending to meet the increasing demands of its population.

The source of discontent has varied from the lack of employment opportunities and low pay, to demands for greater autonomy in the east of the country. With little effective state security, Libya’s largest source of revenue has been identified as its weakest spot. The government has so far failed to come up with a policy to respond to the crisis beyond condemning the protesters.

Just over a year after trumpeting Libya’s first democratic elections, the General National Congress, the new parliament, is now increasingly viewed as impotent, allowing the country to fracture along regional, ideological and tribal lines.

The longer-term effect on the sector is hard to gauge. It certainly dents any ambitions the Oil Ministry might have had of holding a new licensing round in the coming years. International oil companies were already wary of the risky security situation and were only slowly getting back to exploration work. The prolonged outages will give them another reason to back out of the country, following the lead of US oil firm Marathon, which now appears willing to sell its stake in its joint venture with the state-owned Waha Oil Company.

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