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Libya containing Es Sider oil fire but export resumption in question

Libya has made progress containing a fire at its largest oil port that has destroyed four days of the country's oil production but the damage to storage tanks will hamper efforts to resume exports, officials and industry insiders said.

The fire at Es Sider, the country's main oil export terminal, has been blazing for a week and is a visible indication of the destructive violence that threatens to tear the country apart almost four years after the overthrow of Muammar Gaddafi.

The North African country is in the middle of a power struggle between two opposing governments -- the internationally recognized authorities in the east and rivals who have seized power in the capital -- that are vying for control of Africa's biggest oil reserves.

Both sides command forces made up of former rebel troops which helped oust Gaddafi but which are now fighting each other since a group called Libya Dawn took Tripoli in August, forcing the recognized prime minister, Abdullah al-Thinni, to flee to the east of the country.

Fighting this month reached an eastern region known as the oil crescent, which is home to the country's biggest export terminals, Es Sider and Ras Lanuf, forcing their closure and depriving Libya of at least 300,000 barrels a day of oil production.

Last week, a rocket hit an oil storage tank at Es Sider as a force allied to the Tripoli government made a new push to take the ports. A fire -- for which both sides blame each other -- has damaged seven tanks and destroyed up to 1.8 million barrels of oil, four times Libya's daily output.

The shutdown of the two ports is a blow to Libya's already crippled public finances as the central bank has been burning through its dollar reserves to keep the country afloat. Oil output has slumped to around 380,000 bpd, a fifth of what Libya used to pump before the 2011 uprising and insufficient to fund the budget.

No Budget

From next week, the country will not have a budget as neither of the country's rival parliaments has agreed on a new one. Spending has been kept to a minimum by the central bank, which is trying to stay out of the conflict.

Libyan firefighters managed to extinguish fires at five storage tanks, leaving only two ablaze, Mohamed El Harari, a spokesman for state oil firm NOC, said.

Ali al-Hassi, a military spokesman for Thinni's forces in Es Sider, said U.S. firefighters contracted earlier might not be needed any more. Pictures on social media showed a group of firefighters relaxing after working for days non-stop.

Rebuilding the tanks will costs $105 million, al-Mabrook al-Buseif, Thinni's top oil official, told Reuters on Tuesday. Over 20 percent of storage capacity has been hit, industry experts say, and two tanks have collapsed.

The bigger question will be when and how repairs will be carried out as fighting is continuing with almost daily air strikes and artillery exchanges. U.S. oil majors Marathon, Hess and ConocoPhillips run Es Sider in partnership with a Libyan state firm.

The United Nations is planning to resume peace talks next week but diplomats are not optimistic as neither side is showing sign of being ready to make concessions. A first round of talks in September made no progress.

The conflict has been exacerbated by a separate battle involving Thinni's forces, which are allied to a former general, Khalifa Haftar, and are fighting Islamist insurgents in the main eastern city of Benghazi.

Thinni has accused Libya Dawn of relying on backing from Islamist fighters, while the rulers in Tripoli say Thinni is rehabilitating former Gaddafi officials with the help of Egypt, a country deeply worried by the spread of Islamists in the region.

[Source: By Ayman al-Warfalli, Reuters, Benghazi, Lby, 31Dec14]

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