Libya’s confrontation undercuts efforts to raise oil output

April 02, 2017
Showdown. General view of the industrial zone at the oil port of Ras Lanuf. (Reuters)

Tunis - A showdown between eastern and western Libya over who con­trols the country’s oil sector could ad­versely affect production and harm efforts to resolve the conflict.

The confrontation could lead to an escalation of the relatively low-intensity Libyan conflict and jeop­ardise the neutrality of state bu­reaucracies handling the oil sector production, mainly the National Oil Corporation (NOC) and the Central Bank of Libya, which funnel rev­enues from foreign oil sales.

The NOC’s neutrality and role as the single steward of the oil wealth are being threatened by the UN-brokered Government of National Accord (GNA) in Tripoli and its ri­vals in the east, backed by the in­ternationally recognised House of Representatives (HoR).

The GNA, through its Presidential Council, announced its intention to strip powers from the NOC by shar­ing control of the energy industry. It said it was assuming the author­ity to supervise energy sector in­vestments and exploitation of the country’s oil resources, including the approval or cancellation of con­tracts.

NOC Chairman Mustafa Sanalla challenged the move, asking the Presidential Council to withdraw its resolution. “It has exceeded its au­thority,” he said. “Only the House of Representatives, the legislature, has the power to make these changes.”

NOC and Sanalla have the upper hand, given the company’s experi­ence and the neutrality of its top managers, which they emphasised could guarantee Libya has an eco­nomic lifeline. Economists argue that safeguarding the neutrality and bureaucratic skills of the NOC and central bank would eventually ease the country’s conflict.

All Libyans benefit from the oil revenues. Even the dozens of rival militias in Tripoli and elsewhere receive salaries and other perks from the central bank.

Sanalla reported in March that Libya should see a steady increase in oil output this year — reaching the highest production level since 2014. Libya is producing 715,000 barrels per day (bpd) and expects to expand output to nearly 1.3 mil­lion bpd by the end of 2017, NOC statements said.

The strife-plagued North African country needs partnerships with foreign oil firms to develop its en­ergy industry. That requires main­taining the NOC’s neutrality and keeping it as the country’s sole op­tion for foreign partners.

The NOC said it has identified “il­legal” efforts to sell crude oil and warned potential buyers to avoid such contracts.

Rivals of the Tripoli-based gov­ernment attempted to sell oil in de­fiance of NOC, which has its head­quarters in Tripoli, but were set back by UN resolutions.

The international community has bolstered NOC’s role with ambas­sadors to Libya from the United States, China, Russia, Britain and France, saying in a joint statement that they “underscore that petro­leum infrastructure, production, export and revenues belong to all Libyan people and must remain the exclusive stewardship of NOC”.

The statement came after forces led by Field Marshal Khalifa Haf­tar regained control of the key oil ports of Sidra and Ras Lanuf on March 14th. Haftar’s allies in the east accused rivals in the west of backing extremist Islamist militias, which seized the ports earlier in the month.