NEWS ANALYSIS: Libyan oil minister Arousi resigns, latest blow to sector

London (Platts)--22Jan2014/714 am EST/1214 GMT


Libya's oil sector, already severely disrupted by months of protests and strikes, received a new blow Tuesday when five ministers from the Justice and Construction Party (JCP) -- including oil minister Abdel Bari al-Arousi -- quit Prime Minister Ali Zeidan's government.

Arousi had been oil minister since November 2012, and oversaw the recovery of the Libyan oil sector to almost pre-civil war levels of 1.4-1.5 million b/d by the spring of 2013.

However, production slumped to lows of some 200,000 b/d last autumn because of the series of disruptions to key oil infrastructure throughout the country, and Arousi was blamed in some circles for losing control of the sector.

On Tuesday, the five ministers from the JCP -- the political arm of the Libyan branch of the Muslim Brotherhood that has been bloodily repressed in neighboring Egypt since the ouster of elected president Mohamed Morsi -- tendered their resignations, AFP reported.

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It came after three weeks of wrangling over an Islamist-inspired censure motion against Zeidan.

But the Islamists failed to secure the required 120 votes in the 194-member General National Congress to pass the motion.

Zeidan, an independent who has the backing of the liberal Alliance of National Forces, has vowed to remain in his post, saying the resignations were an attempt to destabilize his government.

INEXPERIENCED, INEFFECTIVE

Analysts believe that, although the loss of Arousi is another blow to an already confused oil sector, it may give Tripoli the opportunity to inject some new blood into the industry.

"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," Geoff Porter of consultancy North Africa Risk Consulting (NARCO) said Wednesday.

"But in Libya's case, the hydrocarbons sector's problems are much bigger than merely ministerial issues and Arousi has been exceptionally ineffective since he took office," Porter said. "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."

Porter said Arousi had lacked the experience to manage Libya's oil sector.

"Part of Arousi's failure was due to his own inexperience. In 2013, Arousi made several statements about sector developments that proved to be either wholly untrue or that were never pursued and developed," Porter said. "As a result, he lost credibility with sector stakeholders."

On several occasions in 2013, Arousi pledged that oil exports from the east of the country -- suspended since July by occupiers -- were set to restart in a matter of days.

He also vowed to return oil output to pre-civil war levels, which is still to materialize.

REPLACEMENTS It remains unclear how Zeidan will proceed with replacing the five ministers.

Libya's political landscape remains confused, and factions in the east of the country continue to look to secure independence.

Porter said that Libya's deputy oil minister, Omar Shakmak, would be a good candidate to take over at the helm.

At a conference in London in September focused on investment in Libya, Shakmak was described by organizers as an industry veteran who had been central to the development of Libya's oil sector in the Moammar Qadhafi era.

Porter said Shakmak was often seen as in control of the sector.

"Shakmak became the more reliable voice of the ministry, so much so that Arousi was largely irrelevant," he said. "Arousi's resignation may afford Libya the opportunity to restore credible management to the sector."

Porter also names Mustafa Sanalla, executive board member at state-owned NOC, as a possible candidate.

Sanalla, speaking in London in September, painted a more pragmatic picture of the country's oil sector, saying: "We are going through a very difficult transition period."

He also conceded that many of Libya's producing fields need upgrading because of their age, as does the country's refining sector.

Porter though said the position of oil minister in today's Libya might not be exactly desirable.

"The sector is in crisis. Foreign investors have lost confidence and Libyan personnel and Libyans in general are being shortchanged," he said. "It remains an open question though whether [possible replacements] 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."

--Stuart Elliott, stuart.elliott@platts.com
--Edited by James Leech, james.leech@platts.com

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