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Sanallah: Keep NOC out of the war

Oil is now driving the conflict in Libya, says the state company’s boss, and dragging the firm into it will worsen the situation

National Oil Company’s (NOC) chairman fears that rival factions are poised for a major new oil war for control of central oilfields, and warned the country’s politicians that unless they move fast the conflict could engulf the industry, killing off chances for a production revival and worsening the economy.

“The war now is about who is governing the oil,” Mustafa Sanallah said in an interview with Petroleum Economist. “The civil war is guided by the war for the oil. Everyone wants to govern the oil.”

The warring sides in Libya’s civil conflict must avoid further damage to the country’s energy installations and stop politicising NOC, which is the only institution that can now transcend the chaos, said Sanallah.

Ominously, troops from the two sides in the conflict – Misratan-led Libyan Dawn forces allied with the UN-appointed Government of National Accord (GNA) in Tripoli; and the Libyan National Army (LNA) led by General Khalifa Hafter and allied with the House of Representatives (HoR) in Tobruk – are now amassing in the Sirte basin, the once-prolific heartland of Libyan oil production.

“I’m afraid there will be a battle,” said Sanallah. “I sent a very clear message, asking all parties to keep oil out of this conflict. If these facilities are subjected to war it will be a disaster for the country and be bad for all Libyans.”

His comments, in a wide-ranging interview with Petroleum Economist, echoed those made by international powers, which “express[ed] their concern at reports of increasing tension near the Zueitina oil facility”, the latest flashpoint, and called for all Libyan oil infrastructure to be “transferred unconditionally and without preconditions or delay back to the legitimate national authorities recognised as such by UN Security Council Resolution 2259”.

That statement allowed for some ambiguity – the Libyan Political Agreement of 17 December 2015, the basis for the UN’s decision to appoint the GNA, also called on the HoR to endorse the unity government. It has not done so.

And on the ground, events have been moving further away from the political settlement agreed last year.

While Misratan brigades have been focused on the battle to reclaim the city of Sirte from Islamic State (IS) and extend their reach eastwards, the LNA has gained control of many (shuttered) oilfields in the basin. On 9 August, the LNA fought against the Benghazi Defence Brigades, an Islamist group, at the Naga oilfield. In recent days, LNA forces have also arrived at Zueitina port, ahead of a potential assault to gain it from the Petroleum Facilities Guard, a militia now allied with the GNA.

Western interests in Libya in recent months has been focused on the effort to defeat Islamic State (IS), a strategic objective that has led to tactical involvement by Western special forces working with both sides in Libya’s civil war. French special forces have supported the LNA in Benghazi and US and UK teams have assisted Misrata in Sirte, including on 1 August the launching by the US of air strikes against IS positions in the city.

But analysts have for months feared that the broader battle between Libya’s two sides for control of Libya’s oil sector would follow IS’s defeat in Sirte – and the moment may be nearing.

NOC itself has been riven by the political manifestation of the conflict. Earlier this year, the HoR set up a rival, eastern NOC in an attempt to cleave an autonomous oil sector and keep for itself revenue from oil exports – the bulk of which in the past year have gone through the eastern port of Tobruk, from production at the Sarir and Misla fields, deep in HoR-controlled territory.

Sanallah and the head of eastern NOC, Nagi al-Maghrabi, struck a deal in July to reunify the two companies. Sanallah said this deal remains intact. (Sanallah chairs the company and Maghrabi remains as a member of the board, which must report to both the HoR and GNA.)

But Sanallah cautioned that “some people in the PC” – the Presidency Council, the executive arm of the GNA – were “trying to re-engineer” NOC “for their own interests”. It has been rumoured that Misratan elements in the PC have sought to have Sanallah replaced as chairman, though he insisted his position is safe.

Sanallah also dismissed a new settlement between the east and west on oil-export revenue sharing. All export income is currently collected by Libya’s Central Bank, in Tripoli, which disburses to the regions and institutions. Some eastern politicians – reflecting claims that the central bank has been overtaken by Muslim Brotherhood or Misratan interests – wanted an eastern central bank to do this; or for the east to be given more money.

But this was meaningless, Sanallah suggested. Oil income in the first seven months of 2016 had been just $2.3bn. The “most crucial issue” he said, was not revenue sharing but revenue itself. The central bank’s reserves were being depleted because of the collapse in Libyan oil exports. The PC had created a budget for $37bn, he said, “but our revenue [in 2016] will not exceed $4.5bn. How are we going to cover this?”

Maintaining NOC’s neutrality was essential if Libya was to recover from its present crisis, Sanallah said. The company had “six million shares”, he added, referring to Libya’s population. “If NOC is put in this chaos and conflict, it will be a disaster for the country.” Despite the civil war, NOC had continued to supply fuel sourced from the LNA-controlled southeast to Tripoli. “The only institution that is keeping the country united is NOC.”

Sanallah said he planned soon to “to bring all tribes, municipalities, leaders of militias and maybe also invite some people from the PC, some from the UN” to establish a new national accord, based on preserving the oil sector. “Maybe in a few weeks you will see something like this.”

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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