Zawiya oil refinery, 40 km west of Tripoli

Huge placards proclaim “Yes to disarming”, “No to a state of militias” on the building housing the Tripoli offices of Mellitah, a joint venture between Libya and Eni, the Italian oil and gas group.

They are a reminder of two days of deadly clashes between rival armed groups from the towns of Zintan and Zuara over who should guard Mellitah’s oil and gas complex in western Libya. The firefight last month left at least one dead and several injured. It also disrupted production and caused a temporary halt in natural gas exports to Italy before the army finally came in to restore order.

Violent incidents such as those at Mellitah have become a recurrent feature for the hydrocarbons industry in Libya since the 2011 fall of Muammer Gaddafi, the former president.

Though Libya has managed to restore oil production to pre-revolution levels of some 1.6m barrels a day, the weakness of its government and the proliferation of armed groups have transformed the environment for international companies working in the oil-rich North African country.

Heavily armed militias are invading oilfields, locals demanding jobs are blockading facilities, and protests are closing down export terminals. And then there are the regional concerns in the wake of the attack on an oil facility in neighbouring Algeria earlier this year.

The disruptions to production have cost the Opec member about $1bn over the past five months, Abdulbari Ali al-Arousi, the oil minister, told the Financial Times. “When there are sit-ins, oilfields shut down,” he said. “The losses are the result of failure to produce and to export. We try to resolve these problems through dialogue and discussion.”

The government has beefed up its Petroleum Facilities Guard, which now numbers 18,000 men, many of them former militia members who are being integrated into the military. But still officials say there are no easy answers to the security problems in the chaotic and near-lawless country, still awash with weapons.

“Security is manageable, but things are very volatile,” said the country manager of an international company. “Expatriates are not being targeted, but you can get caught up in a bad situation. It is a completely different operation from before the [fall of Gaddafi]. Management cannot force anything on the staff.”

Part of the problem is that some of the local militias who guarded oil installations during the war to overthrow Gaddafi now feel entitled to jobs and other benefits, say diplomats and industry insiders. Before the revolution, stringent security was not necessary.

“It was a private army situation [during the revolution] but now the government is taking over security at oil installations,” said a western diplomat. “Those people have to be offered something or integrated. The government is doing it, but it is a long process.”

In March, Waha Oil, owned by the state-run National Oil Corporation in partnership with ConocoPhillips, Hess and Marathon Oil cancelled a contract with a private-sector oil services company after a 17-day blockade by protesters who said it took away their jobs.

Companies should consider corporate social responsibility programmes for local communities, said Mr Arousi, the oil minister. “They can offer health and educational services, or train people or lay on some transport, perhaps a bus or an ambulance,” he said.

Dealing with rowdy militias in the chaotic aftermath of the revolution is not their only challenge. Many fear rising Islamic militancy in the borderless Sahara desert. Though Islamist radicals have not targeted oil installations in Libya, presumed militants killed a US ambassador in the summer in the eastern city of Benghazi.

In January, al-Qaeda affiliates attacked a gas complex in In Amenas operated by BP and Statoil just across the border in Algeria. Scores of people, including staff and militants, were killed after a stand-off that sent ripples of fear through the industry in Libya.

“In Amenas was a game changer,” said the oil executive. “It has been a wake-up call for the Libyan government. Before the revolution, oilfields were not protected. They had guards but they lacked training and resources. Now the government is taking measures, with more guards and intelligence-gathering, especially with the prevailing political environment and the situation in Mali and Algeria.”

Fears remain, however, over the training, efficacy and loyalty to their army commanders of militia members drafted to protect oil facilities.

“Try telling a guy who has been wearing shorts and flip-flops and looting buildings for a year and half, ‘you can’t do that any more. Now you get 800 dinars and you follow orders’,” said the western diplomat. “It’s a difficult process.”

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