Head of Libyan National Oil Company criticizes Zintan brigades

The chair of the Libyan National Oil Company (NOC), Mustafa Sanallah noted that attempts to raise Libya's oil output face numerous problems. Among them are pipelines closed off by the Zintan brigades from the western Al-Feel and Al-Sharara fields

Sanallah said: “Both oilfields have an output capacity of 400 thousand barrels per day and Libya is definitely missing that because Zintani armed gangs had closed the Reyaina pipelines.” Sanallah said that the NOC is attempting to contact the armed group in order to convince them to allow maintenance personnel to reopen the pipelines. In July 2015 he said that the NOC had contacted Zintan Municipality but was unable to negotiate a solution. Sanallah claims the closure resulted in a loss to the Libyan treasury of 27 billion dollars, saying: “Libya has lost those billions over the acts of a heinous gang.” Sanallah said that the NOC tried to solve the issue through Zintani elders and notables to try and reach a settlement but to no avail and he claimed:

“Even the city’s municipal members failed to oblige the gangs to implement the outcome statement of the July 07, 2016 meeting, in which Italian Eni Oil Company and Spanish Repsol Oil Company took part. We have fell back upon the judiciary and we contacted the General Attorney to arrest the gangs and bring them to justice after all our attempts to settle the issue went in vain.”It is doubtful that the General Attorney has any power to arrest Zintan brigade members.

Libya began production again from the Waha fields in the east, bringing the country’s total output to 580,000 barrels per day. This is up some 80,000 barrels per day since the National Oil Corporation’s (NOC) last posted figure.

The Zintan militias, al-Qaqa and al-Sawaiq battalions, are anti-Islamist militias allied with powerful Marshal Haftar, commander in chief of the Libyan National Army associated with the House of Representatives (HoR), rival government to the UN-backed Government of National Accord. They were part of Haftar's Operation Dignity from the first launching an attack and burning the parliament buildings in May of 2014, as shown on the appended video.

Sanallah unlike many others, such as Martin Kobler the UN envoy to Libya, was quick to welcome the takeover of four oil exporting ports by Haftar from his opponent the head of the Libyan Facilities Guard (PFG) Ibrahim Jodhran. Jodhran actually supported the GNA and its NOC after a deal was signed with the GNA. However, Sanallah was quite critical of the deal and considered Jodhran a schemer and crook. When Haftar gave control of the ports to the NOC and allowed exports, Sanallah was no doubt quite happy. Perhaps, Sanallah will put pressure on Haftar to try and persuade his Zintan allies to allow the oil to flow again. Sanallah fails to mention that the Zintan brigades along with Haftar do not recognize the GNA whose national oil company Sanallah heads.

Tankers in Libya's eastern ports warned to have permit from eastern oil company

Abdulraziig al-Nadori, Chief of the General Staff of the House of Representatives, warned foreign ships not to enter Libyan territorial waters without a permit from the Bayda-based National Oil Company (NOC) or risk being targeted by air or ground forces

Al-Nadori urged all oil companies to make sure to coordinate their activities with the parallel NOC in the east before they enter Libyan territorial waters. He said an official statement would be made later. This statement makes it clear that as far as the House of Representatives (HoR) is concerned there is no agreement with the rival Tripoli-based NOC as was supposed to have been negotiated some time back.

In a statement Tuesday, Al-Nadori urged all oil companies to coordinate with the parallel NOC in Benghazi before they enter Libyan waters saying an official statement about this issue will be delivered later. In the first days of July there were meetings with officials among officials of the Tripoli-based National Oil Company, recognized by the Government of National Accord the UN and internationally, and the Bayda-based rival National Oil Company, recognized by the Al-Thinni government of the HoR. A merger was agreed to with the head of the Tripoli-based NOC, Mustafa Sanalla, remaining chair and the head of the rival NOC, becoming a member of the board. However it became very clear within a few days that the deal was not acceptable to Al-Thinni or his government as noted in an article in Digital Journal on July 8. Al-Thinni demanded specific shares of the revenue among other things and said there was no deal until his demands were met. The press seems not to have followed up on the issue.

Another recent deal has also seemed to have fallen through. The Special Representative of the Secretary-General (SRSG) Martin Kobler met with head of the Petroleum Facilities Guard (PFG), Ibrahim Jadhran, and arranged a deal to reopen the ports of Ras Lanauf and Es Sidre. However, Kobler seems to have done this without the participation of or consent of the Tripol-based NOC or its head. According to the Libya Observer, the PC of the GNA agreed to it. It is not clear whether the Presidency Council of the GNA was involved in the negotiations. Jadhran is still apparently waiting for some one from the GNA to sign on to the agreement. Sanalla wrote a savagely critical letter to Kobler about the deal warning that the deal makes the NOC open to bribery by militias, in order to keep the oil flowing. However, it is already in that position. It is not clear what the alternative is at present.

In reaction to the deal from a quarter not supporting the GNA or NOC tribes in the area south of the two ports in the oil fields that feed into the ports demanded that they be consulted and their Council agree to any deal to restart production and open up the lines to the ports. Just to emphasize the need for others to be involved, General Khalifa Haftar and his militia (LNA) control the oil fields in the Wahat region. He said that he will not allow any pumping of oil unless there is coordination with his group and the Al-Thinni government.

The initial optimism after the apparent merger of the two rival NOC's and the agreement with Jadhran appears to have been misguided, as both deals appear to have fallen apart or not been finalized. Libya is desperately in need of revenue from increased oil production. Both sides lose if there is no agreement providing some degree of hope that an agreement can still be found.l

Oil production and export in Libya may increase only slowly

Recently the two rival Libyan National Oil Companies (NOC), one based in the east in Bayda and the other in the west in Tripoli, have agreed to unify. This is just one small step in restoring production and exports of oil from Libya.

The Tripoli-based NOC is the one recognized by the UN, most of the international community and the UN-backed Government of National Accord (GNA), while the Bayda-based NOC is recognized by the rival House of Representatives (HoR) based in Tobruk. The HoR has yet to recognize the GNA or vote confidence in it as required by the Libyan Political Agreement (LPA).

The unified NOC is described in a recent Digital Journal article. It is also reported in the Libya Gazette and here. While some analysts predict a rapid rise in production and exports, there are still many issues unresolved as a recent article in Bloomberg reports.

The article notes that the political division between the GNA and the HoR is still not solved. The agreement retains Mustafa Sanailla, the chair of the Tripoli-based NOC as chair of the new NOC and Naji al-Maighrabi, chair of the Bayda-based NOC, becomes a board member of the new NOC. In order to reach the agreement it was agreed that the headquarters of the NOC would move to Benghazi and that board meetings would occur there as soon as security admits. This is a move fraught with danger for the GNA, since Benghazi is controlled by the HoR and protected by Khalifa Haftar, the commander-in-chief of the Libyan National Army. Neither the HoR nor Haftar recognize the GNA. Even in negotiating with the eastern NOC, the GNA is violating its own prohibitions from dealing with "parallel institutions" not recognized as part of the legitimate structures of the GNA which is recognized by the UN and most countries as sole legitimate Libyan government. The HoR has gained considerable more leverage and legitimacy. The same general processes are under way in agreements between the two competing Libyan Central Banks. As long as the continued political division remains the agreement with regards to oil will be fragile although no doubt both sides wish to avoid returning to a situation where the competing parties prevent each other from producing and exporting oil resulting in a lose-lose game.

However, there are other factors that threaten increased production and export of oil. Much of the countries oil structure is damaged. Some of it was caused by attacks by the Islamic State but in other clashes as well. In many cases, the oil fields are in territory controlled by forces hostile to those in control of the ports where the oil is exported. Agreements have to be reached between groups such as the Petroleum Forces Guard and General Hafter who controls some of the oil fields.

Richard Mallinson, an analyst at Energy Aspects in London said:“I am not convinced the announcement about the reunification of the two rival NOCs will actually deliver any increase in production any time soon." The new government is struggling to unify the various factions and Haftar and his allies “have sufficient control of infrastructure and politics in the east to prevent the GNA from broadening its mandate.”

These divisions have resulted in oil production being 85 percent less than before the overthrow of Gadaffi. For example in the southwest of Libya, the El Feel and Sharar oil fields which together are Libya's largest are controlled by GNA allies. However, the pipeline linking the fields to the coast export ports are blocked by Zintani militia affiliated with General Hafar. The shipping terminal is controlled by allies of the Tripoli branch of the Petroleum Facilities Guard (PFG). In the east, some fields are controlled by Haftar's LNA forces, many of the export facilities are held by units of the PFG headed by Ibrahim Jodhran aligned at present with the GNA and a foe of Haftar.

As analyst Mattia Toaldo notes the merger between the two NOC's is a welcome step forward but "restarting production depends on forces who actually control installations". No single group has control. Those who do are often at odds with others. While output has increased in June by about 40,000 barrels a day to 320,00 barrels a month it is still quite low.

There are splits even within the Petroleum Facilities Guard with the Brega PFG backing Haftar. Exports remain shut down at Ras Lanuf, Zuetina, and Es Sider under the control of members of the PFG headed by Ibrahim Jodhran. Es Sider facilities are severely damaged and tanks are damaged at Ras Lanuf. The facilities suffer from lack of maintenance as well.

As Toaldo remarks, Haftar wants to spoil the LPA because one section deprives him of his position as commander in chief of the armed forces. As Tore Hamming, an analyst at Risk Intelligence based in Denmark puts it there may be more clashes between forces loyal to the GNA and those of Haftar's LNA: “It will probably become more violent, unless they find a solution over Haftar and his role in the Libyan setup. In this struggle, control of the oil becomes more important. I’m not optimistic for the short to medium term.”

However, Martin Kobler, Special Representative of the Secretary-General tweets; "Invited for Libyan political dialogue meeting after eid to discuss next steps on basis of the #LPA. Eid Mubarak to all!!" Kobler is no doubt planning some new stratagem to get around the need for the HoR to vote confidence in the GNA, as required by the LPA, since he has already failed numerous times to achieve this.