Security clouds speedy recovery of oil sector

Increasing insecurity and disruptions are overshadowing Libya's speedy return to pre-war oil production, delaying much-needed foreign expertise and investment as well as threatening output. Libya, with Africa's largest oil reserves, is nearing pre-conflict production of 1.6 million barrels per day, exceeding initial forecasts after last year's uprising against Muammar Gaddafi brought it to a virtual standstill. However cracks are starting to appear as the new leadership struggles to impose order in a country awash with weapons. Expatriate workers remain nervous about precarious security. The oil ministry has condemned what it called attempts by armed groups to hinder work of some companies after several violent incidents in the last few weeks.Security is essential and we hope we can have a better situation than what we have now," Deputy Oil Minister Omar Shakmak said. "Of course any risk to the environment has an effect not only for international oil companies but also for national oil companies." In another headache for the sector, former rebel fighters guarding oil installations in the absence of an effective national army have been calling for payment, at times violently. Former fighters recently entered the Tripoli office of Akakus, a joint venture with Spain's Repsol, uninvited. In a separate incident, a group abducted its manager for several hours, Shakmak said, calling the incident "unacceptable". At the Zawiyah oil refinery west of Tripoli, former fighters guarding the facility barged into the administrative office calling for more money, employees said. "It appears that Libya has raised production as high as it can without a bigger foreign presence in the country, either directly from international oil companies or from oil services companies," Geoff Porter of North Africa Risk Consulting said. "It does not seem that Libya will be able to break through the 1.5 million bpd threshold and get back to pre-conflict levels of production without a material improvement in the country's security environment." With the bulk of Libya's revenues generated by oil sales, Tripoli cannot afford any setbacks on the one front which has seen a return to normality since last year's war. Libyan oil company employees have held small protests calling for better security conditions and Shakmak said there were plans to increase security outside offices. Officials have long spoken of plans to train thousands of former rebel fighters guarding Libya's oil infrastructure under an umbrella oil protection force. However progress has been slow as the central authorities remain weak and fighters hold sway. For now, the former fighters are paid by the local firms, earning 900-1,000 Libyan dinars a month, officials say. "I am proud of what they have done, they protected the oil fields ... I support that we should take care of them and make the payments but in a proper way," Shakmak said. Negotiations continue between Libya's oil chiefs and the defence ministry over the force but officials there say the process is not running smoothly. "The [Libyan] oil companies give them a salary so they don't [see the] need to join the army. This is a problem for us," Hamed Al Shalwe, director of international cooperation at the ministry of defence said. Popular discontent With popular discontent simmering, disgruntled Libyans targeted the Opec member's oil infrastructure last month when they closed off the headquarters of Libya's biggest oil producer, Arabian Gulf Oil Company (Agoco), for two weeks. Calling for more transparency over how Libya's assets are being spent and jobs for youth, protesters prevented Agoco employees from entering their office in the eastern city of Benghazi.