Russian Energy Interest In Libya. In the Libyan quagmire, one actor is playing a fluid and balanced strategy, expecting a pay off in the long-term: i.e., the Russian Federation. Through a balanced approach and avoidance of taking any firm side in the ongoing conflict, Russia is determined to appear as a reliable actor and a responsible game changer in the overall situation in the area. Economic and political interests are playing the crucial role, following the traditional three routes, through which Russia is usually exerting its influence abroad: energy, weapons and infrastructures. This paper is devoted to the energy dimension of Russian activism in Libya, as Gazprom, Rosneft and Tatneft are slowly coming back to the country and consolidating the achievements gained before 2011, with an eye to further enhancement.

Libya’s energy sector

Libya has been typically considered as an influential actor in the world energy market, and joined OPEC in 1962. According to the BP Statistical review of World Energy (2018), crude oil is by far the most prominent energy source, with 48 thousand million barrels of proved reserves (approximately 3% of the total proved reserves on Earth), making up almost 79% of energy production (p.12). The OPEC report for the country (2018) states that oil represents the 82% of export earnings, and Oil&Gas sector accounts for approximately 60% of the GDP. It comes easy therefore to understand the effect a fall in oil production may have on the economy in the country. After the beginning of the hostilities in the country in 2011, up to 2016, it has been calculated that the output has fallen by 13,5. Despite this critical disruption, 2017 was characterized by a significant growth, thanks to a slightly more stabilized situation in the country, at least as far as production sites are concerned: in fact, in 2017 the output grew by 102% in comparison with the previous year, reaching a peak of production of 865 thousands barrel per day (approximately 40,8 million tonnes) (BP, p.14). Natural gas production is the second main asset of the country, significantly inferior to that of crude oil: the overall proved reserves are considered to be around 1,4 tcm, with an output of 11,5 bcm in 2017 (BP, p.28), of which just 4,4 bcm destined to export (to Italy).

Russia’s involvement in the Libyan energy sector

Russia-Libya relations have been intense and prosperous since when the USSR was basically the sole supplier of weapons to the African country. For the first time, in April 2008, a Russian president, Vladimir Putin, visited Libya. A major breakthrough for the relations between the two countries was the elimination of the Libyan debt of $4.5 bln in exchange for contracts in the infrastructure and energy fields, as reported by B92 (2008). In 2008, the Italian economic newspaper, IlSole24Ore underlined the strategic importance of the agreement reached about a Memorandum of Understanding between Gazprom and the Libyan National Oil Corporation to set up a Joint Venture, in order to deal with exploration, production and transportation of oil and gas. Moreover, between 2007 and 2008, Gazprom won a tender for the natural gas exploration and production in the plot No. 64, in the area of Gadames, located in the Western part of the country. On Gazprom International website, other areas of involvement are outlined: the company participates also in the offshore plot No. 19, under the condition of production sharing, and in the Oil concessions C96 and C97 in partnership with Wintershall A.G.

As outlined on its website, Pjsc Tatneft had production sharing contracts signed for operations in Libya, but due to the political situation in the country, the execution of exploration work programs was suspended in 2013. According to the National Oil Corporation (NOC) website (2018), the chairman, Eng. Mustafa Sanalla, met Mr Rustam Khalimov, the first Deputy General Director of Russian oil company Tatneft on October 4th 2018, in the margins of the Russian Energy Week conference. The companies discussed areas of mutual cooperation, in addition to Tatneft’s forthcoming resumption of its 2007 exploration and production sharing agreement (EPSA).

 In February 2017, Rosneft signed a crude offtake agreement with Libya’s National Oil Corporation, and according to Reuters (2017) lifting off was on already in July. The fields involved eastern areas of the country. Rosneft interest to invest in Libya is motivated by the vast reserves in the country, the low cost of production and the presence of export route to Italy. Russia is very actively playing in the Libyan energy market, which goes hand in hand with Russian activism in other fields, especially the military one. The two are assisted by the political involvement and stand Russia is showing in the Libyan political situation.

From the very beginning of the revolution, Russia has been a vehement opponent of the Western resolution to overthrow Qaddafi, which would have, as it actually happened, led to political disorder for the years to come, especially in the light of a missing day-after plan for the country. Civil war has raged and plagued the country up to these days with an actual division of power between the widely recognized Government of National Accord (GNA) led by Fayez al-Sarraj in the Western part of the country, and a second major block, internationally identified with the figure of the Field Marshal Khalifa Haftar, leader of the Libyan National Army, controlling a wide area in the East. Moscow has been supporting Haftar, and the Field Marshal from his part has been repeatedly looking for Russian support: in 2016 and 2017, Haftar visited Moscow three times, reportedly to ask for Russian military aid (Kartsev, 2018 ) and twice in 2018, in August and November, when he talked directly with Russia’s defence minister Sergei Shoigu (Reuters, 2018).  On September 15th, 2018, Serraj met in Moscow the presidential envoy for the Middle East and Africa, Mikhail Bogdanov.

As stated by the Arab Weekly (2018), Russian pragmatism is evident by its attitude toward the two main sides involved: it is supporting discreetly but actively Haftar, nevertheless not going against the GNA, backed by the United Nations. Russia gained this way a reputation of reliable actor and mediator in the area, filling the vacuum left behind by the Western powers. This enflamed the debate in Europe, where the British newspaper The Sun (2018) disclosed  persistent rumors  on a Russian plan to make a new Syria out of Libya. Apart from the hyperbolic description made by the newspaper concerns on the control of the migration routes, Russian military counsellors are widely thought to be in Libya, as testified by sources of RBC (2018). This can be understood as a support to the Field Marshal, in order to protect the sites for exploration and production of oil, which are located mostly in the Eastern area of the country, controlled by Haftar. It is reasonable to think that Russia is more interested in influencing the Libyan energy sector, rather than pushing for a resolution of the conflict, whose possible evolution or resolution appear still blurred. No one seems to be ready to gamble for one side or another in the country for the time being. In fact, as Belen’kaja noted (2017), Libya is one of the strongest players in world energy market, and the rise in production witnessed in the last year could put at risk the quota agreed by the OPEC countries on their 171st meeting, held on November 30, 2016.

This is even more so, according to the fact OPEC, or better its format OPEC+ with Russia heading the non-OPEC countries, has agreed last week on a larger-than-expected cut in production, as reported by Bloomberg (2018), thanks to a deal between Iran and Saudi Arabia mainly brokered by Russia itself, which expects a 1.2 million oil barrel per day to be removed from the market. Forbes (2018) argue that this cut could turn out to be even more consistent than expected, reaching 1.5 million bpd, according to Venezuela’s political and economic situation and Iran isolation resulting from US sanctions, despite the actual results of this decision are yet to be fully understood and verified.  In fact, the amount of $70 per barrel target by OPEC is already somehow dubious to reach, as US constantly increasing its oil output. Russia is trying to balance and mediate amongst the different positions in the OPEC, in order to contrast this trend. In this scenario, Libya is definitely part of the game according to its exemptions from the quota and its ever-growing production, witnessed in the current year. Libya, together with Nigeria has been since January 2017 exempted from OPEC oil cuts according to the difficult situation in the country. Nevertheless, with production skyrocketing in the second half of 2018 up to 1.05 million bpd in November, according to the Platts OPEC survey (2018), the other OPEC countries were confident to convince Libya to cut the output as well. Still, the situation is far from stabilized and defined. On December, 9th, 2018, Libya declared force majeure on exports from its largest oilfield, after tribesmen and state security guards seized the facility, as reported by CNBC (2018).

Russian Energy policy in Libya

Russian Energy policy in Libya should be understood in a wide way, not just in a view of mere competition with Europe. No doubt, the gas route to Italy represents an important percentage of Italian gas import, but should not be overemphasized as TAP is expected to come to completion the next year, diversifying the country imports. Libya is important in Russian calculation for the role it may play in the wider world oil market game, apart from providing a strong presence in the African country and, no doubt, expanding Russian sphere of influence up to the Central Mediterranean. But it is still early to figure out how the whole situation would turn out to be, and maybe a more balanced approach can be a good example for other world powers.

Antonio Carbotti

Energy Analyst


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