Libyan oil authority consolidates operations
Tunis - The deal reached by Libya’s National Oil Company (NOC) to merge operations in the eastern and western parts of the country came almost 100 days after the arrival in Tripoli of the internationally backed unity government to rebuild Libya’s state institutions after five years of chaos.
The agreement was a victory for the Government of National Accord led by Fayez al-Sarraj on the scale of his decision to move from a naval base on the edge of Tripoli to the official prime minister’s headquarters more than three months after his arrival in the Libyan capital.
The oil move will help Libya increase exports and the government expand revenues to restore public services, end bank cash shortages and gain the confidence of Libyans and the trust of foreign backers should the government win back control over oil and gas facilities from rival militias.
The NOC said on July 2nd that rival boards in the west and east agreed to merge operations. The NOC head will lead the merged company with the chief of the eastern company to become a board member.
Additionally, the merged company would relocate to Benghazi, in the eastern part of the country.
“We made a strategic choice to put our divisions behind us and to unify and integrate NOC,” its chairman, Mustafa Sanalla, said in the statement.
“This agreement will send a very strong signal to the Libyan people and to the international community that the Presidential Council is able to deliver consensus and reconciliation.”
The NOC in Tripoli, recognised by the international community, and the eastern oil company operated in parallel as rival governments struggled for control. The announced deal means that the UN-backed government will supersede those administrations but it has to clear militia hurdles and conflicting claims to oil wealth.
The NOC has an ambitious plan to restore Libyan oil production to 2010 levels of 1.6 million barrels per day (bpd) from the current 400,000 bpd. Damage to pipelines and ports from fighting since 2011 may take years to repair.
Libyan militias aligned with the government in Tripoli on July 13th said they were “within a few days” of clearing Sirte of Islamic State (ISIS) fighters but it was not clear whether such an expected victory would consolidate the oil deal and allow Sarraj’s government to take over oil facilities in the Sirte basin.
Analysts said they expected Sarraj’s main rival in the east, Khalifa Haftar, the general who commands the rump of the Libyan national army, to try to take control of Sirte and its oil facilities as he did when ISIS was chased from Derna and Benghazi.
Haftar’s allies in the Tobruk-based eastern government headed by Abdullah al-Thani said they rejected the oil agreement until conditions were met. Thani requested that 40% of net oil revenues be allocated to the eastern region and the remaining 60% shared by western and southern regions.
He demanded that salaries and subsidies on fuel, food, electricity and medicine for the eastern region should not be taken from net gains but from the 60% allocated to western and southern regions.
“We never accept dictates from the Tripoli group. We will not comply with any agreement that violates our sovereignty,” he said in an interview with Libyan television.
Analysts said Thani’s government has little influence beyond its rhetoric and optimistic statements about oil wealth.
“Both sides of the government divide have no genuine force on the ground. Real power is in the hands of the militias. The control of oil revenues means having the control of political and security decisions,” said Mohamed al-Harj, Libyan analyst at the Atlantic Council.
Analysts said the oil merger was announced because none of the sides, even powerful militias, can sell oil and gas abroad without state legitimacy.