Funding row halts Libya oil exports from key terminal
TRIPOLI--In what is a clear challenge to the new Government of National Unity of Abdulhamid Dbeibah, Libya’s National Oil Corporation said crude exports have been suspended from one of the country’s top terminals following the central bank’s “refusal” to release budget funds.
Strife-torn Libya’s energy sector has sprung back to life since a ceasefire deal between warring parties in October.
Oil production has stabilised at about 1.2 million barrels per day since December, but remains below pre-chaos levels that in 2014 were approaching 2 million bpd.
“The National Oil Corporation announces a state of force majeure as of April 19, 2021 for the interruption of producing and exporting of crude oil shipments through the port of Hariga,” the NOC said in a statement issued on Monday.
“This announcement comes as a result of the Central Bank of Libya’s refusal to liquidate the oil sector budget for long months,” it added.
The state of force majeure allows the NOC to be exonerated from responsibility in the event of non-compliance with delivery contracts.
The NOC said the situation had led to the “exacerbation of the indebtedness of some companies” that have been unable to meet financial and technical commitments.
The operational funding being sought is not the money apportioned in the 2021 budget drawn up by the new Government of National Unity (GNU) but that in the 2020 budget of the previous Government of National Accord led by Faiez Sarraj. It had allocated LD 1.048 billion to the NOC.
The funds received to date represented “less than two percent of the needs of NOC and its companies to achieve the targets set for the year 2021”, said NOC..
The Arabian Gulf Oil Company, which like other NOC subsidiaries relies on state finances to operate, was among those forced to reduce production. AGOCO’s main fields in the area are Sarrir and Messla, south of Tobruk. The eight fields affected have at capacity of 280,000 bpd, although Hariga’s output capacity is 230,000 bpd.
According to NOC chairman Mustafa Sanallah, the losses from the shutdown may be more than $26m a day.
The NOC alleged that the central bank “with such actions seeks to politicise the national oil sector”. Observers believe that behind NOC’s move is a bitter rivalry between its technocratic chief Mustafa Sanallah and the long-term Central Bank of Libya governor Saddek Elkaber.
Ever since the rule of Gadhafi, NOC has had no control over its revenues and has has to apply for every cent it needs to maintain and run its oil and gas infrastructure. Sanallah has long been pushing for this to change, at least for NOC having a working float.
Before this crisis broke, Sanallah was in Benghazin in March discussing with AGOCO’s directors the company’s financial plight. Six days later, March 31, 2021, he met the new deputy premier for southern Libya, Ramadan Ahmed Bujnah and the GNU’s finance minister, Khaled Al-Mabrouk Abdullah, to point out the problems facing the industry because of the unpaid budget allocations.
According to a statement from the NOC at the time, these included security issues, the payment obligations of subsidiary companies and repairs and maintenance. It is clear that no action was taken by Dbeibah’s government.
Libya, which has Africa’s largest proven crude oil reserves, has struggled to emerge from violence and political turmoil since its descent into chaos in the aftermath of the 2011 NATO-backed uprising that ousted dictator Muammar Gadhafi.
A unity government was installed last month to oversee the transition to December elections.
Last week, the NOC announced a record increase in revenues generated by the sale of hydrocarbons, which exceeded $2 billion in March compared with $1.235 billion for February. Given that March was three days longer than February, oil income had almost doubled.