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NOC pleads for money from Tripoli

Unity government’s refusal to transfer funds pledged to state firm is stalling oil-output recovery, says NOC chief

Libya’s oil recovery is being hindered by the UN-appointed government’s refusal to disburse money to the state company, said head of National Oil Corporation (NOC) Mustafa Sanallah.

Libya’s oil output could leap from 200,000 barrels a day now to 0.9m b/d by year end and 1.2m b/d “within 12 months” – but only if the Government of National Accord’s (GNA) Presidency Council starts to release money it has pledged to NOC, Sanallah said in a lengthy interview with Petroleum Economist.

“Why are they blocking the money for NOC?” Sanallah asked, referring to the Presidency Council, the GNA’s executive arm. The money was crucial for the state company to begin a recovery in oil output, to the benefit of Libya’s treasury, he said. “If you give me one penny I will give you 10 – we can generate money.”

Sanallah said on 10 August that it had been two weeks since the council had agreed to disburse money to NOC – “but up to now nothing”. In the same period, the militia group blocking three oil ports in the Sirte basin has been paid an initial sum estimated to be $40m, as part of a deal struck by the UN to open the terminals.

Sanallah said politics was partly responsible for the collapse in Libya’s oil output – but the main factor preventing a recovery was the lack of funds.

The NOC chairman showed Petroleum Economist a detailed bottom-up plan for Libya’s oil recovery, composed by the firm’s engineers. Production at the workhorse Sarir oilfield, in Libya’s southeast, which has been shut down because of a dearth of equipment, could be restored “very soon”, said Sanallah. Including output from other nearby fields this would add 270,000 b/d to production. But this could only be achieved promptly with money to replace spare parts and other kit.

Output from two large southwestern fields, Sharara and Elephant, which have been shut since November 2014, could reach 70,000 b/d “within days” of an agreement to restart; hit 200,000 b/d by year-end; and rise again by 200,000 b/d in 2017.

Sanallah said NOC had been in “continuous dialogue” with groups blocking the fields and pipelines linking them to export terminals – though he also fears the recent UN deal with the Petroleum Facilities Guards in the Sirte basin could add more obstructions.

In the Sirte basin, NOC would have to lift force majeure that currently covers the area’s export terminals and several fields as a precursor to any new production. A number of fields remain secure and in good condition, said Sanallah, and he recently visited the Jalo Oasis, deep in the basin’s south, to discuss the restart with tribes guarding assets.

But severe damage to storage facilities at Ras Lanuf and Es-Sider – struck during the 2011 revolution, by Libya Dawn’s attacks in 2014, and by Islamic State (IS) in 2015 – would restrict output from the once-prolific Sirte basin to about 200,000 b/d until longer-term repairs were carried out. At Es-Sider port, attacks had crippled 80% of the facility’s oil-storage capacity, which has been reduced from 6m barrels to just 750,000. Half of Ras Lanuf’s storage capacity had also been knocked out.

Several fields damaged when IS rampaged through the basin in 2015 would also need extensive and lengthy repairs, including Total’s Mabruk field. All told, Sanallah said, damage from conflict had reduced Libya’s total technical capacity by 400,000 b/d, to 1.2m b/d.

Chris Stephen contributed to this report, from Tunis

**The full interview will appear in Petroleum Economist’s in-depth survey of Libya’s oil sector in the September 2016 issue of the magazine.

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