Funding constraints could erode capacity to increase oil production
Libya’s National Oil Corporation (NOC) remains challenged by the rival national oil company that has been set up in the east of the country, UN experts have said in a new report.
“While the Tripoli-based National Oil Corporation, led by Mustafa Sanalla, retains its leading institutional role, it remains concerned by the activities of the Benghazi-based ‘eastern National Oil Corporation’ led by Almabruk Sultan,” the UN said in the report, which was published on 16 March.
“This parallel entity, with the support of the Al-Baida-based non-legitimate government, continues to challenge the authority of Sanalla in order to gain control over the export of Libyan crude oil.
“The eastern National Oil Corporation has continued its efforts to export crude oil and import refined petroleum products.”
The National Oil Corporation is also facing budgetary constraints as result of the lack of funds allocated by the Government of National Accord (GNA), according to the report.
It said: “These funds are not enough for the increased maintenance needs of the oil facilities that resulted from the lifting of the force majeure and from the Covid-19 crisis.
“The funding constraints could erode the National Oil Corporation’s capacity to sustain increasing oil production levels.”
In the report, the UN Expert Panel says that it documented one attempt to illicitly export crude oil, as well as several attempts to illicitly export condensate.
While Libya’s fuel smuggling networks remain intact, they have seen a slump in activity due to lower global oil prices and the Covid-19 pandemic, according to the UN.
The panel of experts monitoring sanctions against Libya said in the report said it expects an increase in activity when global demand for oil products increases.
“Global demand for marine fuels in 2020 experienced a sharp decline owing to the impact on world trade of the Covid-19 pandemic.
“The ready availability of bunker fuel means market prices have remained low, including in the bunkering areas near Libya and Malta.
“The current average price of marine gas oil (0.1 per cent sulphur) in Malta is $453 a metric tonne, compared with $655 in December 2019.
“This sharp decline of crude oil and bunker fuel prices has also increased the demand for tankers as floating storage units.
“The floating storage capacity for refined products peaked in mid-May 2020, and demand for tankers continues to be high.
“The reduction in demand for bunker fuels, high fuel availability, lower bunker prices and the low availability of product tankers have had a negative impact on the parallel market of refined products, principally marine gas oil (0.1 per cent sulphur), illicitly exported from Libya by sea.
“Fuel diversion by sea has therefore been almost nil, and no tankers have been added to the sanctions list.”
On 16 March, a transitional government took power in Libya’s capital, Tripoli, officially beginning a process designed to end 10 years of chaos and lead elections late this year.
Fayez al-Sarraj, head of the outgoing UN-recognised GNA transferred power to Prime Minister Abdelhamid Dbeibah, and Mohammad Younes Menfi, who chairs a three-member presidential council.
In November last year, Libya launched a process to try to unify the forces guarding the country’s oil and gas facilities with a meeting held in the coastal town of Brega.
The creation of a unified oil protection force was stipulated in the ceasefire agreement signed on 23 October in Geneva.
The meeting was hosted by Sirte Oil Company and brought together the chairman of NOC, Mustafa Sanallah, and the commanders of the Petroleum Facilities Guard from both the eastern and western regions.
This article is published by MEED, the world’s leading source of business intelligence about the Middle East. MEED provides exclusive news, data and analysis on the Middle East every day. For access to MEED’s Middle East business intelligence, subscribe here