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.

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.

After agreement oil exports from eastern port of Hariga resume

The Seachance, a tanker that had been blocked from loading oil for three weeks, is now loading 600,000 barrels of oil for shipment to the UK, both port and oil officials said.

Exports from Hariga were blocked earlier this month as the result of a dispute between the eastern and western-based rival National Oil Companies (NOC). The two heads of the rival NOCs met in Vienna and reached an agreement in principle to resume shipments. Earlier, at the end of April, the eastern branch had loaded the Indian-flagged Distya Ameya with oil that was not exported through the Tripoli-based NOC that is recognized by international trades and governments as the sole legitimate exporter of Libyan oil. The tanker was blacklisted by the UN and eventually returned from near Malta, where it could not land, to a western Libyan port under control of the Government of National Accord (GNA) with which the Tripoli-based company cooperates. Blocking the Seachance from loading was probably a response to the actions taken against the Ameya. The Seachance is a Maltese-flagged tanker and the oil it is to load was sold to Glencore for export to the UK.

The dispute is a lose-lose situation for both sides. Neither party is receiving any revenue from the export of oil and the dispute resulted in lower production because of lack of storage facilities at Hariga. The total production in Libya now is about 200,000 barrels a day compared to production of 1.6 million barrels per day before Gadaffi was toppled in 2011. Details of what exactly was decided have not been released. Reuters also reported that Brega port loaded a tanker with 600,000 barrels of oil for shipment to Italy.

AL-Khaleej Al-Arabi Oil Company, that is in charge of Al-Hariga port and nearby oil fields, claimed that more funds were needed to buy maintenance equipment, and pump and power generating stations. The budgeting process needed to be quicker. An official in the Tripoli-based NOC said the two rival parties agreed on resuming exports from AL-Hariga to maintain operating condition of the pipelines and to avoid a looming cash crisis.

.Nagi Emagrabi, the chair of the eastern-based NOC said: "We agreed to keep the National Oil Company neutral away from political conflicts. " Up until the creation of the Government of National Accord (GNA), the NOC had exported both from the Tripoli-based Salvation General National Congress (GNC) controlled-areas and those under control of the HoR. The revenues were divided. With the GNA now recognized as the sole legitimate Libyan government no revenues would go to the HoR. The agreement comes as the recent statement coming out of VIenna warned officials of the GNA , governments, and companies only to deal with officials of the GNA and not "parallel" but unrecognized institutions. Fortunately, officials of the Tripoli-based NOC paid no attention to this directive with the positive result that Libya will be able to export more oil.

Read more: http://www.digitaljournal.com/news/world/oil-shipments-resume-from-libyan-port-of-hariga-after-agreement/article/465787#ixzz49QfJCnir