War and strife cost Libya $68bn in lost oil revenues

Libya has forgone more than $68bn in potential oil revenues since 2013 amid a power struggle between rival factions that has brought the energy industry to a near standstill and wrecked the economy.

The estimate by the Tripoli-based National Oil Corporation (NOC) accounts for the value of lost production as a result of 75 separate oilfield shutdowns and port disruptions.

It offers another measure of the missed opportunity and dysfunction plaguing Libya since the downfall of Muammer Gaddafi in 2011 and the battle between two competing governments.

“The economy is in a very critical situation,” Mustafa Sanalla, chairman of the state-run NOC, told the Financial Times. “Relations between the two governments are really very bad and it has crippled the oil industry.”

Local protests, infrastructure problems and attacks by Isis militants have also contributed, Mr Sanalla said. A 75 per cent fall in world oil prices since mid-2014 means the shrinking stream of crude that Libya has been able to export has brought in less revenue.

The near collapse of the oil industry — the sole pillar of Libya’s economy — has destroyed its finances. Mohamed El Qorchi, the International Monetary Fund’s mission chief for Libya, said the country posted a fiscal deficit last year of 54 per cent of gross domestic product — “one of the highest in the world.”

Meanwhile, the Economist Intelligence Unit predicts Libya will have the world’s fastest-shrinking economy in 2016, beating war-torn Syria as well as Venezuela and Equatorial Guinea.

A civil war has left Libya divided between an internationally recognised authority in the eastern city of Tubruq and an Islamist-leaning government in Tripoli in the west, from which the NOC still operates.

While both sides have fought for control of oil revenues, energy companies and traders have continued to honour agreements made with the Tripoli-based NOC, which remains one of the few functioning institutions.

Oil production has plunged to 362,000 b/d, 20 per cent of its 2011 level. Two-thirds of output is exported.

As the conflict between competing factions rages on, fears are growing that Isis militants will gain further control of energy facilities.

Ahmed Maiteeg, deputy prime minister in the national unity government, which is based in Tunisia, said the priority for a new administration would be to increase oil production to 1.3m barrels per day within six months of taking over. “The biggest obstacle now is the handover of power from the different sides,” he said. “We want to return to Tripoli in a peaceful manner and not through any bloodshed.”