Unreliable Energy Focus: Libya's Energy

Libya hasn't exactly been a united country since the fall of Muammar Gaddafi in 2011. The elected government has failed to control the rebel-held eastern half of the country, but compromise may be the order of the day. The two sides reached an agreement to return four ports (two immediately) to government hands. The ports handed over, Hariga and Zueitina, are the smaller of the four. The larger two ports, Es Sider and Ras Lanuf, will likely take more time to hand over. The first two represented goodwill while the last two are the stakes. Rebel leaders continue to demand measures of autonomy, revenue sharing, and development in return for the final pieces of the agreement. With oil exports being the primary bargaining chip, it would be expected that any agreement becomes more complicated and lengthy than the text on any page.

Libya's eastern ports (Source: WorldBulletin)

So why is Libya even important in the energy marketplace? It has lots of it, particularly oil. While currently only producing about 150,000 barrels of oil per day (leaving the government near financial disaster, though this is denied by the government), Libya has produced upwards of 1.4 million barrels per day since the civil war and upwards of 1.8 million in the years preceding it. Overall, Libya has the ninth most oil reserves in the world, even while a significant portion of its land remains a hydrocarbon terra incognita. In addition, Libya has large natural gas reserves. The upside of Libya's energy sector remains inviting, given its size, small population, and proximity to Europe. That last benefit, a geographic one that cannot be easily overcome by competitors, is critical. Much of Libya's oil is exported to Europe and it has important natural gas pipelines connecting it to the European mainland via Italy. These energy connections may prove increasingly important as European tensions with Russia increase.

The agreement this week between the government and rebels - indicating a possible resumption of Libya's higher export levels - led to a fall in the market price of oil. However, with a ten-day window before oil flows from the ports and two to four weeks before the larger two ports may be handed over, there is little celebration elsewhere thus far; even optimists are cautious. Libya is an important cog in the international energy wheel, albeit a damaged one that has been turning for some time now. If Libya re-enters the energy scene at previous levels, it will make an impact and balance Europe's energy sources.

A Divided Libya in the Backlog of International News

International events seem to be ablaze right now. Between the fear of Crimea seceding to the frantic search for Malaysia Airlines flight 370, there's just not much else that is getting more than a byline these days.

Libya seems to be one of those stories being pushed below the fold. There remains a lack of unity between the eastern and western sections of the country. The 2011 Libyan Civil War may have freed the country from Muammar Gaddafi's dictatorial chains, but they have not mended social, political, and economic divisions since. As with many resource-based economies, some of the most potent underlying resentment stems from regions where resources are found and extracted and the capital, where they are often spent. Eastern Libya has been, by many definitions, operating as an autonomous region of Libya for over a year now.

The rebel government recently tested its autonomy. Just over a week ago, an oil tanker - Morning Glory - docked in Sidra, breaking the blockade of eastern ports held by the rebel government. The rebel government quickly began to load the tanker with oil. Somewhat ironically, the tanker is flying the flag of North Korea. Initially, Libya threatened to bomb the tanker were it to load oil and attempt to leave, having previously fired warning shots at other tankers near ports. The tanker ended up loading 234,000 barrels of oil, evading the naval blockade after being fired on for two days, and is now in the Mediterranean Sea, though the rebels claim it has reached its final destination.

                                          (Morning Glory, from marinetraffic.com via RT.com)

For what it's worth, North Korea denied involvement and claimed to revoke the tanker's registration. It is unlikely that any countries within so few sailing days are willing to risk strained relations with Libya; it's last recorded position seems to be off the coast of India, but that was prior to reaching Libya. It also may have truly been under the Liberian flag.

Nonetheless, any evidence of associations between Libyan rebels and North Korea are bound to strain relations further. The weakness of Libya's government in stopping the tanker led to Prime Minister Ali Zeidan being voted out of office, which doesn't exactly help strengthen faith in government. Around the world, there exists a fear that oil will prove to be Libya's undoing and lead to a second and more violent iteration of the Civil War. It seems that, for the time being, Libya is stuck between the possibility of further war and the Iraq-Kurdistan model of resource-based autonomy, which has not fared so well either. It couldn't hurt to suggest that oil revenues be used wisely, with perhaps technical assistance and planning from some experienced Western powers. Libya's population of just over six million is not so far from Norway's five million, after all.

Libya's East Side Story

Flying under the radar in late 2013, leaders in the eastern half of Libya, which holds 60% of the nation's oil production, declared an autonomous government. Libya has the world's ninth largest oil reserves, and other energy resources aplenty. This declaration came about two years after Libya's Civil War ended, which also ended the 42-year reign of Muammar Gaddafi. Gaddafi's dictatorship largely held in check a nation that had a history of regional autonomy. The political subdivisions throughout Libya's history are Tripolitania, Cyernaica, and Fezzan, with most of the population residing in Tripoliatania and Cyernaica.

Libya's Subdivisions (Source: Fragile States Resource Center)

The recent announcement was certainly a blow to the centralized leadership in Tripoli, but reading the events carefully helps add details to the story. Proponents would like the return of the three-state Libya, last extant under King Irdis in 1951, and one that existed, at times, throughout Libya's history. Although this certainly could lead to a break-up of the country, leaders from the region did not explicitly declare independence, or even self-determination. Leaders seem to be seeking a status closer to the experience of the Kurdish region of Iraq following the Iraq War (though even that status is still debated).

Much like in Iraq, it may boil down to natural resources, regional access, and service delivery. The eastern shadow government is offering up oil to foreign buyers and is promising to open the region's energy resources under its own terms. The central government, meanwhile, has indicated that it will use force, if necessary, to prevent any circumvention of its authority. It has already fired toward a Maltese tanker in order to force it to deviate from an eastern port. Meanwhile, regional access and governmental service delivery are both hampered by protests and a burgeoning insurgency that has blocked off the region for months. These issues sound familiar and are a formula for bigger problems.

Infighting, and possibly even open warfare, will continue to be a risk unless the structure of Libya indicates more clearly how the central government will work with regional authorities. While levels of autonomy are integral to regional function in a territory as large as Libya, it is important that those levels are determined wisely and with both sides in agreement. Nonetheless, all sides must recognize that central governance, to some extent, is necessary.