Sunday, November 13, 2016

Libyan National Oil Company pleads for more funding to increase production

Mustafa Sanalla, head of the Libyan National Oil Company (NOC), has used the two-day meeting in London on the economic crisis in Libya to push for access to $2.5 billion funding he claims is needed for new investment to increase production.

Every time it needs funds, the NOC has to go to the government rather than having its own funds. The system, also used during the Gadaffi era meant that at times the NOC even defaulted on international loan payments since the finance ministry did not make the necessary funds available.
Sanalla claimed that three conditions needed to be met before the NOC could reach oil production of 800,000 barrels per day and 2,750 million cu. ft. of gas per day: “First, the ports and pipelines that are currently open must stay open; second, the blockade of the Riyayna pipeline [currently interdicted by the Zintanis] must be lifted and third, NOC’s budgetary requirements must be met.” Sanalla said that the NOC had to have free access to part of the income from oil and also have the power to borrow to fund itself. Sanalla has taken the opportunity of the London meeting that started yesterday to make his point.
Sanalla claims the production he projects plus revenue from petrochemicals and oil products would generate revenue of $15.847 billion if oil is at $45 per barrel. He also claimed that the 2017 budget of $2.5 billion would return $4.125 in extra NOC revenues and this would be carried on into future years as well. He warned that if the NOC did not get the budget it needed, oil production would level off at 520,000 barrels per day generating $11.72 billion. Since four main eastern ports were seized by Field Marshal Haftar he has allowed the NOC to export from them. Production has increased from around 290,000 barrels a day to around 590,000 barrels a day now. However, this is still far below the 1.5 million barrels per day before the head of the Petroleum Facilities Guard, Ibrahim Jadhran blockaded the ports, which Sanalla claims cost Libya $100 billion.
Sanalla fails to mention that Jadhran had agreed to support the GNA and had an agreement with the government to allow exports but the deal was sabotaged when Field Marshal Haftar seized the ports. Even though Haftar does not support the GNA, as did Jadhran, he has allowed the NOC to export oil. Sanalla was quite critical of the deal with Jadhran and of UN envoy Martin Kobler who had helped broker it.
The Presidency Council(PC) headed by Faiez Serraj has had problems getting the necessary funds to allocate sufficient cash to run government operations including increased funding for the NOC. This has soured relations with the Central Bank governor Saddek Elkaber. The Italian foreign minister Paolo Gentiloni, said at the London meeting that he saw “a glimmer of hope in finding in finding a compromise to break the stalemate between the Libyan government and the Central Bank and put the necessary resources in the heads of the head of the government Faiez Serraj as he tries to consolidate economic and political stability”.
Serraj has been particularly critical of Elkaber for his failure to help the liquidity shortage and allowing the value of the dinar to fall. In return, Elkaber said that Serraj lacked any economic policy and was leading the economy to ruin. Gentiloni said that as well as the lack of liquidity in the banking system, another problem was that employees were not being paid. He said that getting a grip on finances would help the GNA restore infrastructure, particularly for the increase in production of oil and gas.
The London meeting was panned by Ali Gatrani, a member of the PC and supporter of Haftar, who said the London meeting was "a conspiracy designed to impose the will of outside governments on Libya". Gatrani pointed out that the House of Representatives(HoR) was the legislative body of the GNA and the fate of the state budget was in its hands. He also maintained that the PC had been inquorate at its meetings since they were not always attended by the chair and all five deputies as required by the LPA. While the HoR is the legislature of the GNA, it takes on that role only when it votes confidence in the GNA as required by the LPA. The LPA is the Libya Political Agreement. Last August 22 the HoR voted against the GNA and there has been no vote of confidence in the GNA since then. At present, the High State Council claims that it is the legislature of the GNA for now even though by the LPA it is mainly an advisory body.

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