Libya is in political chaos, awash in weapons after the 2011 civil war against Muammar Gaddafi and the steady growth of jihadist strength in the long-turbulent east and the lawless south. But, amid frequent clashes between myriad militias, most of them only nominally under state control, it is getting ready to launch a new oil licensing round to boost production. However, there is widespread scepticism that the major producer will be able to pull it off with the heavily armed militias still running wild 18 months after Gaddafi met his maker and his quirky, unpredictable 42-year rule came to an end.

Oil Minister Abdelbari Al Arusi told The Financial Times that a new oil law to regulate Libya’s energy industry was being drafted and would pave the way for a licensing round for international oil companies by the end of the year, amid the country’s rocky transition from dictatorship to democracy.

Arusi said the government, having restored oil production to the pre-2011 revolution level of 1.55m barrels per day (b/d) since Gaddafi was disposed of in October 2011, now seeks to raise output to 1.7m b/d after sorting out power supply problems. The minister said that “if all goes well” the law should be in place by August.

But political analysts and industry insiders say they are far from convinced that Libya’s political circumstances will permit a consensus on the legislation that will organise further exploitation of the country’s hydro- carbons wealth, Libya’s economic backbone.

Officials say exploration, including BP’s deep-water offshore drilling for known gas and oil reserves in the Gulf of Sirte, could add 10bn barrels of oil to Libya’s proven reserves of 48bn barrels.

The oil industry has been constantly disrupted by heavily armed militias, usually centred on tribal or regional loyalties, in recent months. Locals demanding jobs have been blockading facilities and shutting down export terminals at Tobruk, Ras Lanuf , Zueitina and other Mediterranean ports. In late May, protesters forced the shutdown of the Feel oil field in the desert of southwestern Libya. On top of this, the militias are a major drain on government resources since they’ve been put on the state payroll in a so-far unsuccessful bid to harness them. This swelled the public sector salaries bill to $16bn in 2013, more than double the $6.6bn allocated in the 2010 budget under Gaddafi.

During the eight-month civil war, both sides avoided hitting energy installations because they knew they would have to depend on energy exports once the conflict had ended.

But concerns that this will happen sooner or later rose sharply after the January seizure of the In Amenas gas complex in southeastern Algeria by a jihadist group named Those Who Sign In Blood Brigade, striking from neighbouring southern Libya.

The Brigade, a splinter group of the Algeria-based Al Qaeda in the Islamic Maghreb (AQIM), is led by a one-eyed veteran of the 1980s Afghan War, an Algerian named Mokhtar Belmokhtar, who vowed further attacks. Scores of people, including some 37 expatriate technicians and most of the 40 attackers, were killed at In Amenas when the Algerian military stormed the com- pound in the typical take-no-prisoners policy they have adopted since the massacre-marred civil war against Islamists in 1992-2002.
Algerian Special Forces, backed by helicopter gun-ships firing at anything that moved, went in with all guns blazing, supposedly because they feared the jihadists were going to blow up the complex.

In Amenas, operated by BP and Norway’s Statoil with Algeria’s state oil company, Sonatrach, produces about 20% of the country’s natural gas, so its destruction would have had a serious economic impact.

That bloodshed, on top of the lawlessness pervading Libya amid the Mali fighting has raised concerns that if the regional crisis deepens, as everyone believes it will, oil and gas installations in Libya and elsewhere will inevitably be attacked.

The bloodletting and the political uncertainty has made international oil companies reluctant to send back foreign staff who were pulled out when the uprising against Gaddafi erupted in February 2011 or to undertake risky exploration operations.

This has seriously impeded the Libyan government’s plans to fully restore the energy industry, and will continue to do so while the country remains unstable and highly volatile.

The government has strengthened the Petroleum Facilities Guard to 18,000 men, many of them former militiamen being integrated into the post-revolutionary army. But Libya remains flooded with weapons and is faced with constant threat from Islamist forces in Mali, where French and African troops are battling AQIM and their allies.

Many Libyans abhor this situation, but they act againstthe militias at their peril. Despite growing resentment among the people, the militias still wield immense power and openly defy the government of Prime Minister Ali Zeidan. In late April, several heavily armed militias surrounded government ministries in Tripoli demanding the adoption of a law banning anyone who served under Gaddafi from public office for 10 years, which covers pretty much the entire civil service and most state institutions. Parliament subsequently approved such a law, prompting the immediate resignation of the elected head of parliament, Mohamed Al Magarief, even though he’d defected from the regime in 1980 while ambassador to India, and remained in exile until Gaddafi fell.

In Benghazi, an Islamist bastion during Gaddafi’s day and the cockpit of the revolution that brought him down, at least 31 people were killed and 130 wounded between 8-9 June when unarmed demonstrators gathered outside the militia headquarters of the Libya Shield Brigade to demand the disbanding and disarming of so-called “revolutionary battalions.” That bloodletting led the army chief of staff, Maj. Gen. Youssef Mangoush, to tender his resignation since the offending militiamen were ostensibly under the army’s authority.

The violence cast a pall over government plans to pla-cate easterners by returning the headquarters of the National Oil Corporation from Tripoli to Benghazi and other government-controlled bodies to revive the region’s economy and hopefully encourage foreign oil- men to return as well. Eastern Libya contains most of the country’s vast oil and gas reserves, but punished by Gaddafi it suffered severe deprivation, as well as bearing the brunt of the 2011 fighting.

Libya, security experts say, is fast becoming a key jihadist operational zone which is heightening the instability. Indeed, the word is that AQIM jihadists pushed out of Mali by the French-led military intervention launched in January have established at least three bases in the desolate desert of southern Libya in recent months.

The bombing of the French embassy in Tripoli on 23 April rammed that home. Other foreign missions in Benghazi, capital of eastern Libya and long a jihadist stronghold, have also been attacked.

They include the US consulate, which was hit on 11 September 2012, the anniversary of Al Qaeda’s 2001 suicide attacks on the United States. The visiting US ambassador, Christopher Stevens, was killed along with three other Americans.

US security officials say they have identified five men who may have participated in the killing of the Americans; all are thought to be members of Ansar Al Sharia, a Libyan jihadist militia whose fighters were seen in the area of the US consultate before it was attacked.

The French embassy bombing was the first such terrorist strike in Tripoli. Diplomats believe the attack was a reprisal for Paris’ decision the day before to extend its military intervention in Mali.

There’s a cruel irony in this. AQIM’s seizure of northern Mali, as a vast jihadist base, followed a rebellion by Malian Tuareg tribesmen who had fought as mercenaries for Gaddafi then returned with a vast arsenal of weapons plundered from the Libyan dictator’s armouries.

It was these weapons, now proliferating across the region, that ignited the Mali war.

“The Mali War was blowback from the Libya War,” observed analyst Walter Russell Mead. “Now we have blowback from the Mali War in Libya.”

Diplomats report that jihadists are now trekking across the Sahara Desert to join groups in Benghazi and Derna, another jihadist bastion in eastern Libya, to undermine the fledgling and dangerously fragile new democracy struggling to emerge in Libya.

Dario Cristiani, an analyst at King’s College, Lon- don, observed that the “persistent fragility of the states belonging to the Sahelian strip make the North Africa region a place where political contradictions and internal rivalries promise years of insecurity.”

One former Libyan intelligence officer noted that: “Libya has become the headquarters for Al Qaeda in the Islamic Maghreb.”
Hard on the heels of the deadly attack on In Amenas, jihadists carried out suicide attacks, ostensibly from Libyan territory, against a French-owned uranium plant in the West African desert state of Niger and military base there on 23 May, killing 26 people, 21 soldiers and five bombers. Another AQIM regional ally, the Movement for Oneness and Jihad in West Africa (MUJAO) claimed responsibility for the coordinated bombings in conjunction with Belmokhtar’s Those Who Sign In Blood Brigade and said they were carried to punish France for intervening in Mali. France, the former colonial power in Niger and much of North Africa, gets 20% of the ura- nium it needs to power its nuclear reactors from Niger,

Niger said the attacks were mounted from lawless southern Libya. Tripoli denied that, but Belmokhtar is currently operating from there and it is clear the jihadist groups are exploiting Libya’s poorly policed south and the general turmoil in the country.

“The continuing insecurity in southern Libya, especially in the vast area bordering Algeria and Niger, is allowing jihadists to operate freely in the wide region where border security is lacking and geography and diverging national interests hamper multilateral cooperation to contain militants,” observed the US private intelligence consultancy Stratfor.

“The activity of jihadist groups is not new across the Sahel region, but the lack of security in Libya since the fall of Muammar Gaddafi’s regime has given militants greater access to weapons and sanctuary.”