TRIPOLI—Only a day after the head of the Libyan National Army (LNA) took over Libya’s key oil ports to the dismay of Western powers trying to gain support for a Government of National Accord (GNA), the recently reunified National Oil Corporation (NOC) of Libya has announced that it will start exporting 600,000 barrels of oil per day in just four weeks.
Late last night, the NOC also announced that it will ramp up production and exports to 950,000 barrels per day before the end of the year. That’s up from the approximately 250,000 bpd the country is exporting right now.
The announcement follows the seizure, two days ago, of four major oil terminals by the forces of the LNA, led by General Khalifa Haftar. The LNA managed to take control of the ports of Sidra, Ras Lanuf, Zuetina and Al-Brega in a military operation that resulted in zero casualties.
In a statement late last night, NOC head Mustafa Sanallah said: "We welcome statements from the Libyan National Army allied with House of Representatives and the president of the HoR, Aguila Saleh, that the ports should be placed under NOC's control."
“Our technical teams already started assessing what needs to be done to lift force majeure and restart exports as soon as possible."
LNA spokesman, Colonel Ahmed Mesmari told a press conference earlier yesterday that the army has nothing to do with the oil facilities and will hand them all over to the reunified NOC to operate and resume production freely.
HoR head Ageela Saleh has already given the NOC authorization to make arrangements with their international partners, its companies and affiliates to start operations. Saleh pledged that nothing would be allowed to obstruct these operations.
“Those who hinder and obstruct the export of Libyan oil have caused great suffering in the lives of Libyans, and what the army did [in taking over the ports] is a common public and formal demand,” Saleh said.
Until recently, Libya had two rival National Oil Companies—one in the capital Tripoli, and the other in eastern Benghazi. Recently, the NOCs reunited, bringing Tripoli NOC head Mustafa Sanallah together with Benghazi NOC head Naji Al-Mogherbi. The HoR has approved Sanallah as the legitimate head of the NOC.
The Bigger Picture: Geopolitics & the Glut
Unfortunately for the UN-backed Government of National Accord (GNA)—and to the particular dismay of an array of Western governments (particularly the UK, Italy and the US)--General Haftar’s move indicates that he has solidified a great deal of power. Related: What Is Holding The Electric Car Market Back?
That the takeover of Libya’s ports was done without any casualties, essentially means that it was done without a fight. The Petroleum Facilities Guards (PFG), under the control of Ibrahim Jadran, largely retreated at Haftar’s request, quickly dispersing of any financially based loyalty these tribal militia previously held for Jadran.
But the West is not pleased, despite the fact that the NOCs are now united and by all accounts, the oil is now going to start flowing through the export terminals.
The PFG had been holding Libyan oil exports hostage for more than two and a half years, even before the birth of the GNA. But Jadran is now irrelevant; his tribal bridges have been burned—so too, his ability to block exports and play politics with oil--thanks to General Haftar.
What’s happened here is that Haftar’s move has unified a great deal of Libyan politics overnight. The fears that one or another faction in Libya will announce a new war to liberate the oil terminals have already largely subsided.
By the hour, it is growing increasingly unlikely that anyone is going to challenge Haftar’s move. The General has already handed over the ports to the NOC, which has accepted the takeover definitively, so the entire operation has a significant sense of legitimacy that will be difficult to challenge, try as certain forces might.
The Italian Foreign Minister came out with a statement yesterday attempting to downplay Haftar’s port takeovers by suggesting that the operation was conducted by Sudanese and Chadian rebels. Related: Bad News For The Bakken As Obama Administration Blocks Pipeline
General Haftar, 74, is a former Ghaddafi military man who turned against Ghaddafi in the late 1980s when he was in the United States (we’ll let the reader connect the dots). Haftar returned to Libya during the revolution, fighting against Ghaddafi’s forces. He then launched a war against radical Islamic fores that were assassinating military officers in Benghazi, and went on to become one of the key forces fighting back radical Islamic militants in Libya. That’s exactly his beef with the GNA, which Haftar claimed from the beginning had taken on radical forces he was fighting in the east.
The US and other Western nations have called on Haftar to withdraw from Libya’s oil terminals, saying that the government in Tripoli—the GNA—is the “sole steward” of the country’s oil.
It might be confusing for many to hear these statements, given that for the first time in years, Libya’s oil terminals are not being held hostage. It’s also surprising, given that General Haftar has already handed the terminals over to the legitimate National Oil Company.
The Western plan to install a Government of National Accord has failed—and when there’s less chaos, there’s less opportunity for lucrative oil deals. With everything flowing properly through a unified NOC, there will be rules to follow.
Politics aside, for the markets it means we’re about to add 600,000 bpd to the oil supply glut in four weeks’ time, and another 350,000 bpd by the end of the year, if all goes as planned. Until now, Libya (along with Nigerian militants and Canadian wildfires) has been helping to keep the oil supply and demand balance from tipping further into the glut.
By Moutaz Ali in Tripoli for Oilprice.com
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