After worker's death Libya's largest oil field shut down by protest

(June 8) Sharara, the largest oil field in Libya shut down due to a worker's protest. The workers are protesting the death of a colleague according to a source who could not be identified as he she was not authorized to speak to the media.

The stoppage reduces Libya's output by about 270,000 barrels a day. The shut down is a setback for National Oil Corporation(NOC) head Mustafa Sanallah who had just claimed that Libyan oil production had just reached 808,000 barrels a day. He also said that the NOC expected that number to rise to more than one and a quarter million barrels per day by the end of 2017.

The recent output was at its highest since October 2014 when 850,000 barrels per day were pumped. The increases in Libyan production as well as Nigeria are causing problems for the Organization of Petroleum Exporting Countries(OPEC) that are trying to keep prices up and production down. Cuts were extended after a meeting on May 25 in Vienna.

In spite of the shutdown, oil prices dropped more than 5 percent after the US government reported an unexpected rise in inventories of both oil and gasoline. Yesterday, June 7 US crude futures fell to $45.72 a barrel the lowest sine May 4. The Shahara shutdown is expected to be only temporary and an NOC official said that force majeure is unlikely to be declared although Sanalla did not answer the phone or reply to text messages seeking information.

Crude had just begun flowing from Sharara in western Libya to the Zawiya refinery in late April this year after being closed for three weeks. Another field El Feel was also re-started in April. Before Gaddafi was overthrown in 2011 Libya pumped up to 1.6 million barrels per day. Libya has the largest oil reserves in Africa. Both Libya and Nigeria are exempt from the OPEC cuts. Libyan production in 2017 has improved significantly from 2016. The US is increasing output and Nigeria as well so the oil glut continues even with Libya's main oil field shut down. Increases in prices has resulted in US oil producers upping production and to some extent negating the OPEC cuts.

UPDATE (June9) Production resumed today: "Libya’s Sharara Oil Field resumed production on Friday after two days of closure due to protests".

Chair of Libyan National Oil Company complains of attempts to sell oill illegally

Chairman of the Tripoli-based Libyan National Oil Corporation (NOC) Mustafa Sanalla spoke out against a new attempt he claimed was being made to sell oil outside the monopoly of the NOC.

The NOC put out a statement saying it knows of illegal offers to sell oil at a large discount to official selling prices. The NOC said that if they succeeded Libya would be out hundreds of millions of dollars in lost revenue. The statement gave no details as to who was offering the contract but warned shipping companies such contracts were illegal. The NOC statement cautioned about the contracts: “Entering into them may lead to serious legal consequences and financial losses. NOC does not accept responsibly or liability whatsoever for any loss or damage incurred as the result of entering into contracts with unauthorised individuals.”

The NOC claims that it has contracts with 16 international companies covering the sale of all Libyan oil to be produced this year. The NOC said that only those 16 companies are contracted to buy Liyban oil and charter shipping tankers from Libyan ports for 2017. The companies are: ENI, Total, OMV, Repsol, Rosneft, LukOil, Cepsa, Saras, API, Glencore, Socar, Unipec, Vitol, Gunvor, Petraco, and BB Energy. NOC said that all crude oil exports were paid for by documentary letters of credit and at the official selling price with no discounts.

This would not be the first time that there were attempts to sell oil outside the monopoly of the NOC. In March of 2014 Ibrahim Jadhran's forces in the east tried to ship oil from Es Sidra using the North Korean flagged ship Morning Glory. The ship was eventually seized by US marines and returned to the Tripoli-based government. In April of 2016, the parallel eastern branch of the NOC tried to sell 650,000 barrels to a UAE buyer. The Indian tanker Distya Ameya loaded the oil at Tobruk but was refused entry into Malta. The UN meanwhile sanctioned the ship and it was unable to unload anywhere. It eventually sailed to Zawia in western Libya and unloaded its cargo.

After eastern commander Field Marshall Khalifa Haftar, captured the four ports of the Libyan Oil Crescent last September, he turned over control of the terminals to the NOC and allowed exports. No doubt he decided that it was better for him to cooperate with the NOC in Tripoli rather than attempt to export through the rival eastern NOC even though he does not recognize the UN-brokered Government of National Accord (GNA). Two of the ports were briefly retaken by the Benghazi Defense Brigades but were recaptured by Haftar later. The House of Representatives(HoR) based in Tobruk had urged Haftar to turn over the two ports as soon as he had procured them but did not say to whom. Haftar's Libyan National Army(LNA) had allowed continued oil export from the four ports even though the NOC unification has been stalled. A recent article suggests: "The parliament statement, coupled with the withdrawal of the NOC Benghazi head from the unification deal, appeared to signal that eastern-based factions may try to leverage their military control over the ports and other oil facilities." However a tanker is already loading oil at El Sidra port one of the two recaptured ports so it appears that for now Haftar is continuing with the previous arrangement.

In another development the Presidential Council has taken over most of the powers of the Oil Ministry. The PC will sign off on all projects to boost production, and approve all exploration-production agreements. It will control pricing of oil, gas, and derivatives and oversee the security and protection of all oil resources. It will also control any private investment in the oil sector and approve the National Oil Co. (NOC) budget.

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Two rival Libyan National Oil Companies agree to unify

he heads of the rival National Oil Corporations (NOC) in Libya have agreed to a unified structure with just one NOC. The move will be welcomed by the oil industry and could lead to a quick increase in production.

Before, a meeting in May at which the two rival officials had agreed in principle to a unified NOC, the two sides fought over whether the Tripoli NOC backed by the GNA or the Tobruk branch backed by the HoR had the right to export oil. Attempts by the eastern NOC to export oil had been foiled when a tanker was forced to sail to a western port to unload its oil.

Libyan oil industry leaders claimed that Libya could quickly double its production to over 700,000 barrels per day if conditions were stabilized. Before Gadaffi was overthrown production was 1.6 million barrels per day. There still may be problems increasing production as there is rivalry between various militia groups that can disrupt production.

The agreement sees Mustafa Sanalla, who was chair of the Tripoli-based NOC remain as chair. The head of the eastern-based NOC Naji al-Malghrabi will serve as a board member of the new NOC. If the new structure revives oil production and exports, it could help finance the struggling UN-backed Government of National Accord. It is not clear how the revenues will be divided. No doubt there is agreement that a certain amount will go to areas controlled by the rival HoR. These important details are not reported.

Sanalla said: “This agreement will send a very strong signal to the Libyan people and to the international community that the Presidency Council is able to deliver consensus and reconciliation." However, the agreement violates the position that the NOC based in Tripoli was recognized by the UN, the international community, and the GNA as the sole legitimate NOC. The UN and GNA insisted that any parallel body should not be dealt with at all. Yet the same NOC negotiated with the eastern parallel institution to produce what is in effect a new NOC. Al-Maghrabi said that both men made a strategic choice to put divisions behind them since there was no other way forward. The division had led to a situation where production sunk as low as 200,000 barrels in May. There are hopes that the new structure will be able to help negotiations to open the El Sharara and El Feel oil fields that are closed to disagreements with local groups.

A budget was agreed upon for the rest of the year. There was also agreement that infrastructure repair and upgrading was a prime goal, especially in Benghazi. The agreement anticipates Benghazi being the new headquarters of the NOC. There may be some negative reaction to this within the GNA as Benghazi is not even in an area controlled by the GNA. The NOC is already intending to hold board of directors meeting in Benghazi if security conditions permit.

The join NOC will present reports both to the Presidential Council (PC) of the GNA and also to the House of Representatives (HoR). The NOC recognizes the HoR "as the highest executive and legislative authorities within LIbya". This is ludicrous and incoherent. The HoR becomes the legislature of the GNA once it votes confidence in it but until that time there is no legislature in Libya if the GNA is the sole government. The HoR mandate ran out last October and was not legally extended. However, it has a function as part of the Libya Political Agreement of voting confidence in the GNA and in doing so making itself into the Libyan legislature as part of the GNA. The recognition is bizarre. Does it mean that the HoR can pass laws and that the GNA areas will be subject to them? The GNA for pragmatic reasons appears to be giving up in practice its claim that it is the sole legitimate government. The rival HoR has managed to have the NOC headquarters moved to an area it controls and no doubt received a guarantee to a certain amount of revenue.