With Oil Fields Under Attack, Libya's Economic Future Looks Bleak

Feb 15, 2015
Originally published on February 17, 2015 8:57 am

The headquarters of the National Oil Corporation in Tripoli are gleaming, the floors marble, the offices decked out with black leather chairs and fake flowers. It seems far from the fighting going on over oil terminals around the country.

But the man in charge looks at production and knows the future is bleak.

"We cannot produce. We are losing 80 percent of our production," says Mustapha Sanallah, the chairman of Libya's National Oil Corporation.

He looks like a typical executive, decked out in a suit and glasses. But beneath his calm veneer, he's worried.

"Now we have two problems: low production and low price," he says.

At the current rate, he expects that the country won't even earn 10 percent of the budget money Libya had in 2012, before militias started taking oil infrastructure hostage.

"If there is security in Libya, we can resume production within a few days," Sanallah says.

If there's one thing that has a chance of keeping Libya from totally falling apart, it's oil. It provides nearly all the country's revenue. It's what militias are fighting over. And it's the prize coveted by the two rival governments — one in Tripoli, the other in Libya's east — that claim to be running the country.

The Tripoli faction is seen as Islamist, the eastern government as anti-Islamist — but the fighting is mainly over turf and resources like oil, rather than ideology.

The international community has recognized the eastern government, but it opposes what it sees as the east's divisive attempt to set up a rival national oil company and take control of the industry, something Sanallah says is impossible anyway.

"We are still the NOC [National Oil Company]; the legal NOC is here. I am the chairman of NOC," he says. "[The east] nominated a new chairman of NOC, but there's no staff, there's no people, there's no hardware, there's no software."

International mediators are trying to keep the oil company independent of either side, but oil fields are under attack. One tanker was bombed, and another one was threatened.

Sanallah says he wants to keep oil out of the fight.

"I hope so. I hope so," he says — but he doesn't sound convinced.

His employees are fighting fires at major oil terminals, and with no real security forces, it only takes a few gunmen to shut things down or hold them hostage.

"I think the message was clear to the oil company: There is no security, good security. Otherwise a few people cannot control the vein of the blood of Libya," he says.

And with the terminals closing, Libya's battered economy is taking even more blows because foreign oil companies are pulling out. Libya is only producing about 330,000 barrels a day, increasing the economic burden.

"When you are closing the terminals, it means you cannot produce oil, and if you cannot produce oil, then you cannot produce gas. So we are making up the gas by importing diesel. This is another burden on the shoulders of NOC," he says.

Again, oil is basically what pays for any central Libyan government. How much? "All — 90 to 95 percent. There is no revenue but oil," he says.

If negotiations don't end the fighting, Sanallah says, the country will collapse. A functioning oil industry could be all that stands between Libya as a nation, and Libya as a failed state.

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INDIRA LAKSHMANAN, HOST:

If there's one thing that has a chance of keeping Libya from totally falling apart, it's oil. It's the source of nearly all the country's revenue, and it's the lucrative prize sought by two rival governments that both claim to be running the country. The man in charge of Libya's National Oil Company is trying to hold it all together. NPR's Leila Fadel paid him a visit.

LEILA FADEL, BYLINE: The headquarters of the National Oil Corporation is gleaming. The floor is marble. The office is decked out with black leather chairs and fake flowers. It seems far from the fighting going on over oil terminals around the country. But the man in charge looks at production and knows the future is bleak.

MUSTAPHA SANALLAH: We cannot produce. We are losing 80 percent of our production. So we have two problems - low production, low price.

FADEL: Mustapha Sanallah looks like a typical executive. He's the chairman of Libya's National Oil Corporation, wears a suit and glasses. But beneath his calm veneer, he's worried. At the current rate, he expects the country won't even earn 10 percent of the budget money Libya had in 2012 before militias started taking oil infrastructure hostage.

SANALLAH: If there is security in Libya, we can resume production, you know, within a few days.

FADEL: The oil industry is being coveted by Libya's two rival governments and their loose alliances of mainly independent militias. One's in Tripoli, the other's in the East. While some see the Tripoli faction as more Islamist than the Eastern government, the fighting is mainly over turf and resources like oil. The international community has recognized the Eastern government, but it opposes what it sees as the East's divisive attempt to set up a rival national oil company and take control of the industry - something Sanallah says is impossible anyway, referring to his National Oil Corporation as the NOC.

SANALLAH: We're still NOC. The legal NOC is here. I am the chairman of NOC. They nominate a new chairman of NOC, but there's no staff. There is no people. There's no hardware. There's no software.

FADEL: International mediators are trying to keep the oil company independent of either side. But oil fields are under attack. One tanker was bombed, another threatened. Sanallah says he wants to keep oil out of the fight.

SANALLAH: I hope so. I hope so.

FADEL: But his employees are fighting fires at major oil terminals. And with no real security forces, it only takes a few gunmen to shut things down or hold them hostage.

SANALLAH: I think they made the message was clear to the foreign company. They understood that there is no security - good security. Otherwise a few people cannot control the vein of the blood of Libya.

FADEL: And by closing the terminals, Libya's battered economy takes even more blows because foreign oil companies are pulling out. But also...

SANALLAH: When you're closing the terminals, it means that you cannot produce oil. And if you are not producing oil, then you cannot produce gas. So we are making up the gas by importing diesel. This is another burden on shoulder of NOC.

FADEL: Again, oil is basically what pays for any central Libyan government. How much?

SANALLAH: All, 90 to 95 percent - there's no any revenue but oil. There's no revenue. That's all.

FADEL: Now if negotiations don't end the fighting, Sanallah says, the country will collapse. A functioning oil industry could be what stands between Libya as a nation or a failed state. Leila Fadel, NPR News, Tripoli. Transcript provided by NPR, Copyright NPR.