Threats persist for Libya Crude Oil: Barclays

Commodity Online
A key accomplishment of post-Gadddafi Libya has been the resumption of country's oil exports to nearly pre-war levels.

Libya in many ways defied expectations by boosting exports back to about 1.5 mb/d from a wartime low of 50 kb/d, given the serious concerns about possible war-related damage to the energy infrastructure as well as ongoing unresolved issues surrounding the regional distribution of oil wealth.

The recovery of Libyan oil exports in turn has played a key role in allowing the global oil markets to absorb the current loss of 800 kb/d Iranian barrels due to international sanctions.

But the security challenges appear particularly pronounced in eastern Libya, which accounts for nearly 80% of the country?s oil production.

Counterterrorism experts have consistently expressed concern about extremist elements in eastern Libya. The region is home to a number of Salafi groups, several of which have been placed on the US terrorism watch list.

[A July 2008 West Point report (from the Combating TerrorismCenter) stated that nearly 20% of foreign fighters in Iraq were Libyans (mostly from the east), and that on a per-capita basis, Libya nearly doubled Saudi Arabia as the top source of foreign fighters.]

In the run-up to the July elections, armed militants shut down three major eastern export terminals with a combined capacity of 690 kb/d for 48 hours to signal their displeasure with the regional composition of the constituent assembly. Certainly, the Libyan military conflict took a much more drastic toll on the country?s exports that the civil war did in Algeria, with nearly 97 % of Libyan exports off the market versus almost no change in Algeria.

In the wake of Amenas, the Libya government has pledged to bolster its 15,000 person Petroleum Faculty Guard.

However, the force currently lacks some key equipment ? such as communications devices, night vision equipment and cars for the desert ? and its ranks are mainly filled with militia members as opposed regular army soldiers (Reuters, 23 January 2013) Given these shortcomings, significant support from the international support from will likely be required to make thisforce a credible match for an armed group intent on targeting Libya?s energy assets.

In Libya, the security sector institutions are significantly weaker than their Algerian counterparts. Muammar Gaddafi ruled Libya with an iron grip for more than 40 years and prevented the emergence?of state functioning institutions that could easily step in and run the country in his absence.

The institutional vacuum was particularly pronounced on the security side. The Libyan military was kept weak and divided along tribal and regional lines to prevent it from becoming a rival source of power, and there was no effective professional police force.

Libya?s interim leaders have been forced to rely on the regional and tribal militias to help maintain order. While some of the militias have worked closely with the central government to meet security needs in places like Tripoli,other armed groups refuse to answer to a central authority and frequently clash with rival entities.

Source: http://www.commodityonline.com/news/threats-persist-for-libya-crude-oil-barclays-52876-3-52877.html

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