twitter

Tuesday, October 18, 2016

Oil shipments resume from eastern oil port of Zuwetina

Last Thursday an oil tanker took on the first load of crude for export from the Libyan port of Zuwetina since late last year. The tanker, the Ionic Anassa loaded 800,000 barrels of crude to be exported to China.

Zuwetina is one of several ports that opened last month after being seized by Marshal Haftar's forces associated with the House of Representatives Government (HoR), a rival to the UN-supported Government of National Accord (GNA). However, Haftar has allowed oil to be exported by the National Oil Company (NOC) located in Tripoli and associated with the GNA.
The reopening of the port of Zuwetina, along with Ras Lanuf and Es Sider has allowed Libya to boost oil prodction. Exports have also begun at Ras Lanuf but not at Es Sider which was damaged earlier in clashes with the Islamic State and also Islamist forces who tried to take control of the port.
Oil production has already risen considerably from what it was. An official said that production now stood at between 505,000 and 510,000 barrels a day. Before the ports reopened, production had been just between 200,000 and 300,000 barrels per day. While the NOC said it hoped to raise production to 900,000 barrels a day by year end, this will depend upon reopening blocked pipelines in the west of Libya. One should note that it also depends upon Haftar being satisfied with the revenues received by the eastern government from the sale of oil. In a tweet, Agilah Saleh head of the HoR is quoted as saying: " Ageila Saleh: Oil revenues will go to the central bank in #Tripoli. #Libya "
The announcement of the increase comes just as the OPEC cartel moved a week ago to reduce oil supplies by cutting production. The increased production in Libya will offset some of the cuts made elsewhere in production. However, Libya along with Nigeria were exempted from the cuts imposed on other members of OPEC back on Sept. 28.
Geoff Porter, president of North Africa Risk Consulting said of General Haftar who seized the ports from the Petroleum Facilities Guard: “In the short term, this is very good news. He is making a play to bolster his political legitimacy, and he is trying to present himself as a national unifying figure.” However, Porter points out that Haftar could easily use his seizure of the ports to block exports "if competing militias or the government in Tripoli do not agree to give him whatever political role he demands in in the future." Haftar can also demand that the oil revenue be divided in a way that he approves. Haftar is agreeing to share the oil revenue with the GNA only because otherwise he would not be able to export oil legally.
David Goldwyn, who used to be the top energy diplomat at the US State Department said: “Were Libya able to sustain this level of production for a year, it would certainly undermine the OPEC agreement and result in no reduction whatsoever. But the likelihood for them to sustain that level of production for one month, no less six months, is very low, and that is probably the way OPEC views it.”
Agilah Saleh, president of the HoR said: "The revenues of oil will be deposited in the central bank of Libya and will be for all Libyans according to geographic distribution and density of population. All Libyans benefit from this wealth.” A unified NOC was negotiated some time ago but the HoR had rejected it. It would seem that negotiations are still taking place to finalise arrangements. However for the present Haftar and the HoR appear to be wiling to accept existing distribution arrangements. The alternative is to not to be able to export oil at all and have no revenue coming in.
Commentators fail to point out that the GNA was in fact negotiating with a parallel institution, the eastern NOC, in creating a merged NOC. The agreement ends up ensuring that the HoR and the Libyan National Army(LNA) of Marshal Haftar are funded through the Libyan Central Bank in Tripoli. Instead of cutting off funds and making it difficult for the rival government to survive the GNA in fact has agreed to provide them support through sharing oil revenues. The GNA is putting itself in an ever weakening position versus the rival HoR. Haftar now has more leverage to ask for concessions from the GNA. However, he may not be interested in any deal. He may feel that the final solution in Libya is his Operation Dignity which will end up defeating his Islamist rivals and destroy the GNA.
As the appended video shows many stakeholders are changing their tune about Haftar once he let oil exports resume.


No comments: