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Division in Libya slows production

Libya’s Zueitina terminal has been shut again amid an effort by the east to wrest control of the country’s crude-export revenue

National Oil Company (NOC) declared force majeure at the port on 5 November after the Petroleum Facilities Guard (PFG), ostensibly under the control of the Baida-based government, prevented a tanker from loading. Oil production slumped by about 70,000 barrels a day (b/d) to 375,000 b/d, as fields linked to Zueitina were shut in.

The PFG, which is charged with protecting Libya’s energy installations, told crude buyers they must now register with the Baida branch of NOC, a rival to the established Tripoli-based NOC, and pay money into a new account in Cairo. If successful, the move would deny crucial income to the Central Bank and official NOC, decimate Tripoli’s budget and risk a profound fracturing of the country.

A previous attempt to establish independent exports in the east failed earlier this year when buyers feared the legal implications and refused to cooperate. Tripoli’s NOC remains the legal exporter of Libya’s crude and its Central Bank the legal recipient of revenue. Baida’s NOC has claimed it has lined up new buyers, but no independent trades have yet taken place. In August, Glencore signed a deal with Tripoli’s NOC to lift most of Libya’s oil out of Tobruk. Glencore did not respond to a request for comment.

 

It remains unclear to what extent the PFG is acting under direction from the government in Baida or the House of Representatives (HoR) in Tobruk. If buyers do not accept the new terms, analysts fear the PFG will shut down Hariga or Brega, which are also under its protection.

The PFG’s leader, Ibrahim Jadhran, has pursued a federalist agenda, demanding autonomy for Libya’s east. But his actions have been unpredictable. In August 2013, Petroleum Economist revealed that he had shut down the Ras Lanuf and Es-Sider terminals in an effort to start exporting oil independently of NOC and the government in Tripoli. That move failed.

The latest threat to Libya’s unity follows the collapse of the UN-led peace process in October, which has handed more power to hardliners in both the HoR and the Tripoli-based General National Congress. A division of Libya into east, west and Fezzan (the southwest) could appeal to some of these men.

The dialogue process is all but dead. Recent revelations that Bernardino Leon, the UN diplomat leading negotiations, was in talks with the UAE – the HoR’s staunchest foreign backer and supplier of weapons – about a new job have crippled the UN’s reputation in Libya. Leon has been replaced by German diplomat Martin Kobler. But peace talks have not resumed.

Security has worsened in the political vacuum. Islamic State (IS), in control of much of Libya’s central oil crescent, attempted to attack Brega on November 16. In early October it hit the PFG guarding Es-Sider. The terror-group has said it will continue to target energy infrastructure. Es-Sider and Ras Lanuf, Libya’s two biggest oil export terminals, remain offline and vulnerable. Oilfields to their south have been shut following IS attacks earlier this year. The Libyan National Army, loyal to Baida, continues to fight against terror groups in Benghazi.

Sarir and Misla, two oilfields in eastern Libya, account for about 250,000 b/d of Libya’s current output. Some oil is still flowing to Brega from the Waha fields and the offshore Bouri and El Jurf fields are producing about 70,000 b/d. Sharara and El Feel, in the southwest, remain offline.

 

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