The Fuse

Libya’s Oil in ISIS’ Crosshairs

January 20, 2016

Guest Post by Matthew M. Reed | @matthewmreed

Matthew M. Reed is Vice President of Foreign Reports, Inc., a Washington, DC-based consulting firm focused on oil and politics in the Middle East.

ISIS in Libya map Jan 2016

Unlike Iraq and Syria, where ISIS took over oil production and made a fortune, ISIS in Libya is attacking oil assets in order to undermine rival goverments, both of which it opposes. For ISIS, destruction is good enough for now, because the group lacks the manpower and talent required to capture and control fields. Refining options are limited making the oil less attractive.

2015 was a terrible year for Libya’s oil industry. Civil war and a flurry of ISIS attacks prevented the industry from sustaining the rapid recovery it saw in the second half of 2014. In fact, 2015 was the worst year for Libya’s oil sector since the 2011 uprising. Oil production averaged just 400,000 barrels a day last year (75 percent below capacity) while exports averaged some 250,000 barrels a day at best. Making matters worse was the plunge in oil prices which has only accelerated in recent weeks. If Libya’s Central Bank earned $5 billion from oil sales last year, it would be a miracle.

A recovery can’t be totally ruled out in 2016, but prospects are dim. Any surge in Libyan oil production depends on two things. First and foremost is the establishment of a national unity government endorsed by the United Nations, which would end the civil war and the dispute over who can sell Libya’s oil. The second major obstacle to Libya’s recovery is ISIS, the terrorist group which controls 200 miles of prime real estate along the Gulf of Sirte. It’s thus within striking distance of oil infrastructure on the coast and fields deeper in the desert interior.

ISIS first appeared on the scene in late 2014 but it didn’t attack Libya’s oil assets until February 2015. In February and March, the group repeatedly raided remote oil fields in the central Sirte basin. At least 11 fields were shut down as a result, after the group killed or scared off ill-equipped guards, executed workers, took hostages and targeted the most sensitive field equipment. At the Ghani field, for example, ISIS “offloaded heavy-duty equipment and explosive devices and zeroed in on the field’s nerve center. They blasted the control room and the power station supplying the operation” according to the Wall Street Journal. Other fields were targeted in similar fashion.

Throughout the summer, ISIS concentrated its efforts on Sirte, Muammar Qaddafi’s hometown, which it turned into a fallback stronghold for the group in case it encountered more setbacks in Iraq and Syria. It wasn’t until October that ISIS attacked Libya’s oil wealth again. In the first attack of its kind, the group deployed a car bomb and gunmen in an assault against the Es Sider oil terminal—Libya’s largest. Damage was minimal, but the raid was a prelude for others like it.

In the first week of 2016, ISIS launched at least three similar raids against the Es Sider and Ras Lanuf terminals, which have a combined export capacity of 550,000 barrels a day but have been shut down since late 2014, when they were compromised by the civil war.

In the first week of 2016, ISIS launched at least three similar raids against the Es Sider and Ras Lanuf terminals, which have a combined export capacity of 550,000 barrels a day but have been shut down since late 2014, when they were compromised by the civil war. At no point did ISIS deploy enough men to actually capture the facilities. Instead, they shelled the terminals and storage tanks from afar, and dispatched suicide car bombers and small teams of gunmen to do as much damage as possible. In all three cases the attackers were killed or turned away, but this time the damage was much greater. Eighteen guards were killed and dozens more were wounded. Five storage tanks at the Es Sider terminal were destroyed and two more were lost at Ras Lanuf; altogether, 850,000 barrels of stored oil was torched. As of now, three of Es Sider’s nineteen storage tanks are operational, thanks to the recent ISIS onslaught and damage done during the height of the civil war in late 2014.

The way that ISIS has attacked Libyan oil facilities over the past year tells us much about their intentions. For some time now it’s been clear that ISIS is intent on destroying Libyan oil assets rather than taking them over, as they have in Iraq and Syria. Proof of this is the fact that the group has only sent small teams to attack facilities, most of which—with the exception of the recently attacked main terminals—were poorly defended. Not once have they launched an assault big enough to capture, hold and operate a facility. This strategy makes sense given the limited manpower the group has and Libya’s challenging geography. As of now, ISIS in Libya is believed to have 2,000-3,000 fighters. That’s not much when you consider the amount of territory they control in and around Sirte and recent efforts to expand their influence eastward.

The way that ISIS has attacked Libyan oil facilities over the past year tells us much about their intentions.

In terms of geography, Libya’s oil is mostly found in the country’s interior, far away from the population centers that dot the coast and where ISIS is most active. The only way to move that oil in commercial volumes at a reasonable cost is by pipeline to the coast, where it is refined for domestic use or exported to foreign markets. Libya only has five refineries. All of these facilities are controlled by a major faction other than ISIS, or they are located far away from those oil fields that ISIS could potentially capture—if they chose to do so. (Four of those five refineries are on the coast, the exception being Sarir in the southeast.)

Remember, crude oil is worthless without a refiner. In Syria, we’ve seen locals resort to “backyard refineries” (i.e. simple stills fired in shallow pits) because they are so desperate to earn a living. There is no sign of this activity in Libya, even though there are fuel shortages in some areas. While Libya has a long history of subsidized fuel smuggling, there are no reports of crude oil crossing borders. By contrast, ISIS oil operations in Syria benefit from being so close to populated areas, which allows middlemen and refiners to keep costs down. In Libya, however, the distances involved are too great to make the trade economical.

2016 is on track to be another grim year for Libyan oil. The big questions are: Just how much damage can ISIS do—now that it’s on the offensive again? And how long will Libya’s politicians dither in spite of the threat? If there’s one silver lining, it’s that ISIS’ ambition is constrained by a lack of manpower and the logistical demands of Libya’s far flung oil sector.

Libyan oil production since 2014