Rival eastern oil company in Libya tries to ship oil illegally

The Al-Thinni government of the Tobruk-based House of Representatives (HoR) is planning to export 650,000 barrels of crude that were pumped from the Messia and Sarir oil fields at Hariga port in Tobruk.

According to Omran al-Zwai of the Arabian Gulf Oil Co. tanker Distya Ameya is due to sail on April 25 to Malta. The cargo was sold to DSA Consultancy FZC, a company that is based in the United Arab Emirtates (UAE) according Nagi Elmagrabi, who heads the breakaway National Oil Company in the east. The internationally recognized National Oil Company is based in Tripoli and is cooperating with the UN-brokered Government of National Accord (GNA). International traders such as Glencore deal with it.

Three of the main oil ports in the east are guarded by the Petroleum Forces Guard led by Ibrahim Jodhran. He supports the GNA and would export through the Tripoli-based NOC. He does not control the Hariga port however. General Haftar the commander in chief of the Libyan National Army of the Al-Thinni government, no doubt wants the HoR to export oil so as to provide funds for the Al-Thinni government. Funds can be deposited in a separate branch of the Central Bank of Libya under control of the HoR. Ironically, Jodhran himself has tried to illegally ship oil by a tanker called the Morning Glory and also supported the eastern oil company before deciding to support the GNA and Tripoli NOC. He is a bitter foe of General Haftar.

A few days ago, the Tripoli NOC issued a statement on the situation saying that they had notified the Presidency Council of the GNA of the attempt by the Al-Thinni administration to illegally ship oil: Musfafa Sanalia NOC chairman said:“Agoco, our subsidiary in the east, was instructed yesterday by a Beyda official to load a ship at Marsa el-Hariga, I notified Prime Minister Serraj and the Presidency Council, who understood immediately the seriousness of the issue and took the necessary steps to stop the vessel from loading. Agoco employees and port officials understood this was a political attempt to divide the country, and I am very proud that they resisted the pressure to load this vessel. This had the potential to be a very ugly incident and I am pleased that it has been resolved peacefully without injury to anybody or loss of revenue or damage to the integrity of NOC or the country.”

Sanalia pointed out that the attempted export breached United Nations Security Council resolution 2278.

Sanalia said the NOC had been in contact with the captain of the ship and informed him that he is breaching the UN resolution. The NOC asked him to leave Libyan waters immediately. In response the captain turned off the ship's tracking system. It seems that the ship may be loaded and ready to set sail. A recent tweet says: "Chairman of NOC East confirms 1st crude oil shipment from #Tobruk's Hraiga port. distant pic of the tanker". It is quite possible that the tanker may be intercepted by the US or Italian navy.

Before the 2011 overthrow of Gadaffi, Libya pumped about 1.6 million barrels of oil a day. It now produces only 361,000 barrels a day.

The illegal export of the oil is a serious challenge to the UN and the GNA. The eastern branch of the Libyan National Bank is also planning to print its own banknotes. A recent article by Richard Galustian in the Times of Malta, suggests that Libya could be headed for a breakup between the west and the east. Significantly, Russia has refused to recognize the GNA until a vote of confidence from the HoR. There could be a conflict developing between western supporters of the GNA and supporters of Haftar and the HoR including Egypt, the UAE, the Arab League and now it seems Russia.

Oil ports in eastern Libya may reopen

After being closed for a year, three eastern Libyan oil ports are now set to re-open. The positive development for the oil industry is taking place as the UN-brokered Government of National Accord (GNA) consolidates its power in Tripoli.

The Wall Street Journal reports that militia officials have announced the re-opening. Ali al-Hassi, spokesperson for the Petroleum Facilities Guard(PFG) said: “We are planning to reopen the ports. It’s under the control of the unity government now.” Ironically, the ports were closed after Ibrahim Jodhran or Jadhran head of the PFG militia refused to load any ships that were not registered with the rival National Oil Company of the Tobruk-based House of Representatives (HoR). Now the Tripoli-based neutral National Oil Company is cooperating with the GNA and has apparently broken off any relationships with the rival General National Congress (GNC) based in Tripoli. The three ports are Es Sider, Ras Lanuf, and Zuetina. The GNA confirmedthe re-opening was planned:

Mr. Sarraj’s cabinet, called the Government of National Reconciliation, confirmed on its Facebook page that the “guards [protecting] the installations had agreed to open ports and work immediately” under its control.Faiez Serraj is the Prime Minister of the GNA.

The oil facilities are not guarded by the Libyan National Army(LNA) under commander in chief Khalifa Haftar but by Jodhran's militia group. Jodhran is an opponent of Haftar. When the oil facilities were under attack by the Islamic State, the Libyan National Army did not help defend the facilities. It was left solely to the PFG. The only air support against the IS came from the opposing GNC government.

Jodhran was named commander of the PFG in 2012 after the overthrow of Gadaffi. He became unhappy with the central government, accusing it of corruption and incompetence. He demanded more autonomy for the eastern Cyrenaica area:In 2013, Jadhran set up the Cyrenaica Political Bureau and secured control of eastern ports, namely Sidra, Ras Lanuf and Zueitina.[3] In August 2013, Jathran issued the “Ras Lanuf Declaration”, the declaration asks for the right to “govern our own affairs”.[1] By October 2013, Jathran’s militia , the Cyrenaica Self-Defense Force, was estimated to number 17,500 men.[1]In 2014, Jodhran attempted to illegally sell oil excluding the central government and National Oil Company. The MV Morning Glory was loaded with crude at Sidra and evaded a government blockade. US forces took control of the ship on March 16, 2014 and returned it to the central government. U.S. Ambassador at the time, Deborah Jones, said that Jodhran's action were a "theft from the Libyan people."

Jodhran now supports the GNA and pledges to open the ports. His separatist leanings appear to have disappeared for now. In spite of trying to steal oil and costing Libya billions in lost exports and production he has been transformed into one of the "good guys". While the GNA appears to be gaining support in the west and to some extent in the south, the situation in the east remains uncertain. While the GNA has the support of Jodhran there is not a peep out of the HoR. Haftar will not be pleased with the actions of Jodhran. At present, there is a meeting going on in Marj where Haftar has his headquarters:"‏@LibyaschannelEN Meeting of #GNA critics in #Marj today w/ boycotting deputy PM Ali Gitrani, members of HoR's Sovereignty bloc & some eastern mayors: sources "Haftar could be planning for the HoR to hand over power to a military tribunal. This would be risky. The UN would not recognize the tribunal and he would need to seize the oil ports in order to finance his new Libyan government. If he did decide to do this there could be fighting in the west as well between militia loyal to Haftar and those loyal to the GNA. If the GNA allows Haftar to remain as head of the Libyan National Army, the GNA will implode as Islamists within the GNA rebel or leave.

Egypt signs oil deal with rival to independent Libyan National Oil Company

International oil companies so far have dealt only with the National Oil Company(NOC) based in Tripoli that has maintained a position of neutrality between the two regimes.

The internationally-recognized House of Representatives (HoR) has set up its own rival National Oil Corporation in the east in the hope of keeping all the oil revenues for itself no doubt. So far over the course of almost a year none of the larger international oil companies have been willing to deal with this HoR creation. However, now the eastern -based NOC has reportedly signed a deal to export 2 million barrels of oil to Egypt a month to the Egyptian General Petroleum Company.

The UN and the international community have called for respecting the neutrality of the two main sovereign bodies that give Libya whatever unity it still has, the NOC and the Central Bank of Libya(CBL). This move is particularly worrisome since with the advent of the new Government of National Accord(GNA) the UN and the international oil companies will expect that the NOC will come under the control of the new GNA. Egypt says it supports the GNA. This action directly challenges the GNA by signing a deal with a company under the control of a government that should dissolve and the HoR would become part of the new government. The move makes it appear that Egypt thinks that there might be an actual split of Libya into two separate areas. As a Libya Herald article puts it:The international community are fearful that an effective duplication of sovereign institutions would further weaken the Libyan state and make the current political split of Libya irreversible.

The NOC that is based in Tripoli has the right to take legal action against the eastern oil company and the party in Egypt that signed the deal, the Egyptian General Petroleum company. The NOC(Tripoli) said: “Any operations that are conducted outside the legal validity represented in the National Oil Corporation whose headquarters are located in Bashir Sadawai Street in Tripoli are considered an explicit breach of the law.” It is not clear how the NOC could enforce any decision against the eastern NOC at present. The Tripoli NOC is recognized by such large international traders as Glencore and the Vitol Group. They may have problems loading crude at eastern ports as the HoR wants tankers to register with their eastern NOC.

Oil production in Libya is down about 80 percent from 2011 when the Gadaffi government was toppled. In November Libya pumped about 375,000 barrels a day. The decline in oil prices is creating a budget crisis for both rival governments..

The Italian oil major Eni's CEO met with the chair of the Tripoli-based NOC and both said they were pleased with the recent LPA and the new Government of National Accord. Both felt the new GNA might help stabilize the country. Chair of the NOC Mustafa Sanalla said: "I am very pleased that the collaboration with such an important partner as Eni continues without interruption,"

International oil traders support neutral Libyan National Oil Co.

In spite of threats from the internationally-recognized House of Representative(HoR) in eastern Libya, the Libyan National Oil Corp. based in Tripoli continues to be supported by key international traders such as Glencore, Vitol, and Litasco.

In spite of repeated warnings from the UN and even the threat of sanctions, the HoR set up its own National Oil Corp. in the east and has been repeatedly demanding any international deals be signed with it rather than the neutral National Oil Company based in Tripoli, which has always had a monopoly on oil exports. It deposits revenues in the Libyan Central Bank which then pays salaries for the two rival governments the HoR and the General National Congress(GNC) based in Tripoli.

The HoR has even shut down the Zueitina terminal until tankers register with the eastern NOC and claims a huge deal with the Swiss company Glencore with the neutral NOC is not worth the paper it is printed on, since it was not done through their own NOC in the east.

The CEO of Glencore, Alex Beard, defended his signing of a deal with the neutral NOC, saying the international community fully support the position of the neutral NOC based in Tripoli that it should have the monopoly over contracts in spite of the threats of the HoR to block its tankers. Beard said: “They have made it very clear there is no alternative to the NOC at its legal address in Tripoli as the only recognized marketer of Libyan oil.”

Vitol a huge Swiss-based trading company is working on a supply contract with the NOC that would guarantee delivery of fuel and heavy oil needed to supply all Libyan power plants and hospitals. Ian Taylor, CEO of Vitol said:"The U.N. Security Council recently said it was important for NOC to continue to function for the benefit of all Libyans. The key word there is 'continue'. NOC, based at its legal address in Tripoli, has served Libya well by staying independent. We are confident it will continue to do so."

The chair of the NOC, Mustafa Sanalla, said the company could serve as a model for national unity and claimed Libya is at a critical juncture with attempts by the UN to broker a Libya Political Agreement and a unity Government of National Accord. However, up to now, neither competing government has approved the UN draft as it is. The new UN head of the support mission, Martin Kobler, refuses to amend the draft. Sanalla said a peace could be built around state institutions such as the NOC and Libya National Bank and that they must be kept intact. However, the HoR has tried not only to undercut the operations of the neutral NOC but also the Libyan Central Bank by appointing a rival chair and trying to set up its own branches in the east, independent of the neutral bank.

Litasco, the trading unit of Russia's Lukoil, said also that there is "no alternative" to NOC as a counterpart to any trade deals it makes with Libya. A political agreement and a unity government would go a long way to solve many of the difficulties companies now face in their dealings with Libya but for now dealing with the NOC alone would seem the sensible course of action for the international trading community. At present, global traders appear to be working to strengthen Libyan unity rather than attempting to profit by exploiting the rivalry between the two governments.