Libyan oil authority consolidates operations

Sunday 17/07/2016
A view of pipelines and a loading berth of the Marsa al Hariga oil port in the city of Tobruk, east of Tripoli, Libya.

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.