This is an excerpt from an article in our monthly Libya Focus publication.

Despite some local and international optimism about the implications of the deal between the 33 year-old Petroleum Facilities Guard leader Ibrahim Jedhran and the GNA, oil traders have little faith the deal would hold. Despite some claims that exports could resume within weeks, many traders doubt that any oil will be lifted from Ras Lanuf or Es Sidra export terminals before the end of August. Those who think that exports will resume believe that they will be unpredictable and smaller than expected, as the various interest groups fight over the new and valuable sources of revenue.

One of the major reasons why oil exports will not recover significantly following this deal is because of substantial infrastructure damage. National Oil Corporation (NOC) chairman Mustafa Sanalla noted that he would not be recommending lifting force majeure on these ports until it received operational funds from the GNA. It also wants guarantees from Jedhran and others that NOC will not have to impose force majeure again. NOC needs these operational funds and assurances in order to mitigate the risk of losing global credibility if Libya lifts force majeure but then has to quickly impose it again.

NOC is particularly eager to gain access to more operational funds in order to make the necessary repairs to oil fields and export terminals in order to ensure more consistent oil production and export over time. Such repairs reportedly began at the heavily damaged Es Sidra port on 7 August where six of the nineteen storage tanks are non-operational.

Another reason why oil exports will be slow to resume is because other groups blocking oil production were not included in the deal. There is still, for example, a looming threat that forces associated with General Khalifa Haftar will attack ships loading crude from the eastern ports, and will continue to block oil fields feeding these ports.

The important Repsol operated El Sharara and Eni operated El Feel (Elephant) fields in the south-western Murzuq Basin — are also excluded from the deal. Since August 2013 the fields, which supply up to 400,000 b/d to the export terminals to the west of Tripoli, have been intermittently closed by protesters seeking concessions from successive governments. Protesters have included: members of the marginalised Tuareg minority; unpaid workers at the fields; and members of Zintan militia. These militias — who used to be in charge of protecting these fields — have blocked the pipeline supplying the coastal export terminals, because of their displacement as the protectors of this oil.

These oil fields are potentially also at risk of attack by Islamic State (IS) and there have been renewed discussions about re-opening and properly protecting them. Recognising the importance of resuming production at the El Sharara and El Feel fields, members of the Audit Bureau, the NOC and southern mayors met on 3 August to try and overcome the three-year impasse. It was unclear whether representatives from Zintan attended these meetings, but Zintan’s cooperation would be necessary in order to see a sustained production increase that could reach the western export terminals.

Another reason for the pessimism about the potential of the 28 July oil deal is the on -going political tensions between the rival governments, which claim control over different parts of the recently re-united NOC. This political crisis will continue to undermine the oil sector as long as it persists. In addition, as the conflict spreads, including the disbursement of the IS threat from Sirte, the threats to facilities will increase and threaten increased oil production.