Libya’s Oil Deal Turns Sour As Army Chief Threatens To Bomb Tankers

The chief of staff of the Libyan army has warned foreign companies the army will fire at any non-Libyan tanker entering the country's territorial waters. The warning comes after a spike in tensions in Libya brought about by a controversial deal struck by the so-called government of unity and the Libyan Petroleum Facilities Guard (PFG).

Libya's National Oil Corporation (NOC) firmly believes the deal, struck by the UN-backed government and the PFG to reopen key ports was a mistake, NOC chairman Mustafa Sanalla said in a letter to UN's envoy to Libya Martin Kobler and to oil and diplomatic officials.

Brigadier General Abdel-Razek al-Nadhouri said NOC - its division on Benghazi - was the only party that was entitled to close any deals regarding Libya's oil.

The PFG, which has been blocking ports across Libya, said on Friday it had agreed to a deal with the Government of National Accord (GNA), backed by the UN, to reopen the Ras Lanuf, Es Sider and Zueitina oil ports within days. PFG head Ibrahim Jadhran started leading blockades of ports in 2013 in what he has said was trying to prevent corruption in oil shipments.

Last week PFG protests over unpaid salaries caused delays of shipments at the eastern port Hariga.

The UN-brokered deal included initial payment of salaries for PFG, sources in the know told Reuters. Related: Why Are Oil Producers Rushing To The STACK?

In his letter, Sanalla said it was wrong to reward Jadhran for the blockade of the ports. According to NOC's chairman, other groups would see the deal as an encouragement to block oil operations in Libya, hoping for payout.

Sanalla also said the NOC would pull out its recognition of the Presidential Council, the leadership of the GNA.

Libya has been torn by conflict since the removal of Muammar Gaddafi five years ago. This conflict has had a severe effect on its oil industry, with warring factions blockading oilfields and ports alike. Libya, which has the largest crude oil reserves in Africa, has now become second from the bottom in terms of output among OPEC members.

Now it seems there is a glimmer of hope with the unification of the two NOC branches, as the opponents begin to realize that nobody wins from the blockades. Four ports in eastern Libya remain shut down for now - Es Sider, Zawiya, Ras Lanuf, and Zueitina - but there are hopes they will be reopened soon, after the newly unified NOC said this was its top priority. The combined capacity of the four shuttered terminals is 860,000 bpd.

By Tsvetana Paraskova for Oilprice.com

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