As Libya looks to rebuild the fragile economy after the devastating eight-month civil war in 2011, the nation’s growth engine has almost ground to a halt. Striking workers angry about corruption and low wages have attacked export terminals and oilfields that hold Africa’s largest-known crude reserves. Roaming militias have shut down the terminals, bringing about a steep decline in Libya’s precious oil exports, which account for practically all of the country’s GDP. The unrest also reflects on the rickety authority of Prime Minister Ali Zeidan’s shaky central government and a divided legislature.
Libya could quickly turn around its oil industry from the turmoil of 2011. After bottoming out at only 45,000 bpd in August that year, having fallen 97% since the previous January, production was back near full capacity of 1.6mn bpd by last summer. Now, with shots fired at an oil tanker amid accusations of attempted thefts by army units that were supposed to protect the ports, the oil sector is sliding back to chaos. Oil output fell in the first half of August to 500,000 bpd - about one-third the highs reached last summer and the lowest level since the end of the revolution in October 2011.
The ports blockage that started at the end of July, which led to a 70% plunge in Libya’s oil exports, stems mainly from regional interests vying for control over oil revenues. Libya produces high-quality, very light and very sweet crude, which is easy to refine, and most gets shipped to Europe. Together with declining exports from Iraq and rising theft and pipeline sabotages in Nigeria, Libya’s turmoil has helped boost the benchmark Brent crude by about 7% since July 1 to trade around $110 a barrel.
Libya’s insecurity is already damaging investment in the country. Royal Dutch Shell said last year it was exiting its Libyan exploration blocks. US-based Marathon Oil has signalled it would like to sell its interest there. Even for those who decide to stay, investment prospects may be severely curtailed.
The strikes have already cost the government at least $1.6bn in lost revenue in the past month - money it badly needs for post-war reconstruction. A monthly loss of about $4bn looms and if the closures continue for another month, Libya won’t be able to pay civil-servant salaries and pensions to veterans and will stop paying contractors working on projects.
Nearly two years after the bloody civil war, Libya is still struggling to get on track with rebuilding. But every successful transition requires from the start a cohesive leadership, an active civil society and national unity: factors that are painfully missing in Libya.
Libya is now in dire need of an efficient leadership with a compelling national vision to unify competing authorities, rein in trigger-happy militias and bridge regional divisions for a stable nation that thrives on its oil riches. The longer it takes to contain the oil sector chaos, the bigger the economic hit becomes.
