NARCO Analysis January 2014 Part #2

Tuesday, January 21, 2014

The Justice and Construction Party (JCP), the Muslim Brotherhood’s political party in Libya, has allegedly quit Prime Minister Ali Zeidan’s government. The JCP had five ministers in the cabinet, including most importantly, Minister of Oil and Gas Abdulbari al-Arussi. At first blush, the resignation of an oil minister in a country so heavily dependent on hydrocarbons receipts as Libya would be cause for concern – at the very least, the transition from one minister to the next could cause bureaucratic hiccups – but in Libya’s case, the hydrocarbons sector’s problems are much bigger than merely ministerial issues and al-Arussi has been exceptionally ineffective since he took office sixteen months ago. As a consequence, his resignation affords the opportunity to appoint a more competent replacement and it may actually be good for the sector, which desperately needs good news. Of course, the JCP’s resignation from the government does raise questions about Libya’s political trajectory, but the country’s political fate was already enormously uncertain and the JCP’s resignation does not make it dramatically more so.

Abdulbari al-Arussi was appointed to the Zeidan government because he embodied a unique constellation of characteristics – he was a member of the JCP which mollified Islamists in the General National Congress, he was from Zawiya which satisfied Zeidan’s need for regional diversity, he had some technical expertise which allegedly gave him sector credibility, and he was not from the upper echelons of Qadhafi-era hydrocarbons sector management which insulated him from revolutionary criticism. While these four characteristics made him an appealing candidate, they did not translate into effective leadership. Part of al-Arussi’s failure was due to his own inexperience – it is difficult for a corrosion expert to run a ministry – and part was outside of his control – the Ministry of Oil and Gas was a new post-Qadhafi creation and its remit was never clear.

His shortcomings notwithstanding, Libya’s hydrocarbons sector has been wracked by difficulties over the course of 2013. Foremost among these has been Libyans’ recognition that one of the ways to compel an otherwise unresponsive government to heed their various demands (employment, ethnic rights, federalism, secularism v. Islamism, etc.) was to hold the hydrocarbons sector hostage. Given that the different groups blockading different oil and gas facilities during 2013 were usually aligned with militias that were more powerful and better commanded than the government’s own forces, there was little that Minister al-Arussi could do to restore regular hydrocarbons sector operations.

But al-Arussi’s own inexperience and personal traits compounded the sector’s confusion. Early in 2013 al-Arussi made several statements about sector developments that proved to be either wholly untrue or that were never pursued and developed. As a result, he lost credibility with sector stakeholders. The more experienced Omar Shakmak, al-Arussi’s deputy, filled the breach and became the more reliable voice of the ministry, so much so that al-Arussi was largely irrelevant.

In fact, al-Arussi’s resignation may afford Libya the opportunity to restore credible management to the sector. The sector is in crisis, with production roughly 40% of what it should be and even that 40% in constant jeopardy. Foreign investors have lost confidence and Libyan personnel and Libyans in general are being shortchanged. There are several capable candidates to take over from al-Arussi – including Shakmak, and others from the NOC management committee, such as Mustafa Sanallah. It remains an open question though whether they want to commit themselves to such a sticky problem when the prospects for resolution are so low and the answers are political rather than technical or fiscal. Were some of the more credible sector leaders to take over from al-Arussi, IOCs may see this as a positive sign and hang around a little bit longer to see if new leadership will be able to put the sector back on track.



NARCO CLOSEHOLD is timely, actionable analysis derived from discreet sources. NARCO CLOSEHOLDs are crafted as events merit. They are available to NARCO's subscription and retainer clients and on a case-by-case basis.

Request More Info