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Merger Of Libya’s Rival Oil Companies Meaningless Without Control Over Oilfields

Libya

TRIPOLI--The ground-breaking agreement to unify Libya’s two rival National Oil Companies (NOCs) last week in Ankara, Turkey, is good news for Libyan oil exports on the surface—but the reality is that because certain military factions already control the key oilfields, the deal won’t get off the ground without including them.

The July 2 agreement to merge the hostile NOCs was made by the executives of the Tripoli administration, Mustafa Sanalla, and his counterpart from the rival Benghazi administration, Naji Al-Mogheribi. The agreement effectively recognizes the House of Representatives (HoR) as a legislative body for all of Libya, and recognizes the UN-backed Government of National Accord (GNA) as an executive leader.

But before speculators start betting on the flooding of the market with more Libyan oil, this agreement—while a major step—still requires approval by the HoR, and this approval is not a given.

“We were not even informed about the agreement beforehand by the two signing parties,” Essa Al-Aribi, head of the HoR Oil Committee told Oilprice.com. “We still need further guarantees about locating the HQ of the NOC in Benghazi in addition to other guarantees about the fair distribution of oil among the Libyan regions,” he said. Related: Morgan Stanley Warns That Rising Rig Count Could Undo The Rally

Aribi, who is from Benghazi, is a federalist and known in the parliament as one of the tigers of federalism.

Moreover, the military units belong to the Libyan National Army (LNA) led by General Khalifa Hafter and they are already controlling the country’s major oil fields, including Sarir, Zala, Marada and Ghani. Furthermore, Hafter’s allies in the west, the Zintan tribe, control the Wafa oilfield, which produces up to 300,000 barrels per day.

These military units are not involved in any political comprises. While the Petroleum Facilities Guards (PFG) has recognized the GNA, it is important to understand that they control only the ports—not the oilfields that need to feed the ports. The military units controlled by Haftar are stronger than other military units, and they continue to control fields—making this latest agreement on NOCs a half-measure.

The inability of the head of the GNA, Faiez Serraj, to extend his authority over a sprawling country such as Libya makes the possibility of reaching to practical solutions over oil quite distant.

This month, Libyan factions enter new talks aimed at finding deals with rivals. Despite this week’s good news, the return of oil exports to their glory days requires a wider accord among political and military factions in the country. While the GNA lauds the recent agreement, they also overplay its importance. We’re not quite there yet, so keep this in mind when you’re speculating on the oil glut.

By Moutaz Ali in Tripoli for Oilprice.com

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  • Philip Branton on July 11 2016 said:
    Hmm..........once the shipments are tracked and verified then consumers who have "truth in oil origin" will have the control of which verified oil they choose to purchase. THAT is where all this is really going. Consumers should NOT purchase any of this oil until all associated accounts are posted on-line in real time so that kids worldwide can follow the oil their parents purchase. The people of Libya deserve verifiable resource financial distributions and not fall prey to the mistakes Egypt and Israel have made with their energy financial account dealings. Libya could lead the world in this regard.

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