Libya Oil Supply at Risk as Militia Divides Control of Ports

(Bloomberg) -- Uncertainty about Libyan oil supplies intensified after a militia leader handed over control of some of the country’s biggest crude-exporting terminals to a rival of the Tripoli-based state oil company.

Forces loyal to Khalifa Haftar, a commander in the politically divided nation’s eastern region, turned over ports with a combined export capacity of 800,000 barrels a day to the National Oil Corp. in Benghazi, a city in the east. The transfer of ports including Es Sider, Libya’s biggest, threatened to unsettle markets just days after OPEC agreed to boost output.

“All oil facilities, all oil ports -- not just the ones in the ‘oil crescent’ but even Hariga port -- all oil sectors, oil pipelines, all facilities will be handed over to the National Oil Corp. in Benghazi,” General Ahmed al-Mesmari, a spokesman for Haftar’s forces, said Monday in a televised news conference.

Mustafa Sanalla, chairman of the internationally recognized NOC based in Tripoli in western Libya, countered that Haftar’s army has no legal right to control oil exports from the country and that any attempt to exercise such authority violates United Nations Security Council resolutions and Libyan law. The government in Tripoli urged the UN on Tuesday to “track down and block any potential illegal sales” of Libyan crude, its Presidency Council said on its official Facebook page.

Largest reserves

Libya holds Africa’s largest crude reserves, but seven years of conflict among armed groups vying for influence over its energy wealth have left its production and exports in a precarious state. Recent clashes cost the country about 450,000 barrels of daily production, taking more oil off the market just as the Organization of Petroleum Exporting Countries clinched a deal with allied suppliers to increase output.

Haftar’s handover of five oil ports to the Benghazi authorities may further constrain Libya’s production. The ports include Brega, Zueitina and Ras Lanuf, the nation’s third-largest oil terminal -- all in the so-called oil crescent on Libya’s central coast -- as well as Hariga near the Egyptian border.

Fields that feed these ports, also under Haftar’s control, appeared to be operating normally on Tuesday, according to people with knowledge of the situation, asking not to be identified because they’re not authorized to speak to the media. The companies operating the ports haven’t received any new orders concerning oil shipments, the people said.

Oil Exports

“This is a disaster for Libya and probably for the recent peace efforts. It is hard to see how it can succeed -- the international community has already rebuffed eastern efforts to sell oil independently of Tripoli,” said Derek Brower, managing director of research at U.K.-based consultant Petroleum Policy Intelligence. “It also risks another collapse of Libyan output, which would be devastating for the economy,” and is “a real threat” to its territorial integrity, he said by phone.

The latest developments, by deepening the divide between the rival NOCs and their respective political sponsors, may also shake the confidence of buyers who have been dealing with the Tripoli-based state company as the only entity authorized to sell Libya’s oil, the country’s main source of revenue. Brent crude, the global benchmark, added 0.4 percent to trade at $75.06 a barrel as of 5:45 p.m. Dubai time.

After weeks of heavy fighting, Haftar’s forces seized areas previously captured by a rival militia. Haftar’s spokesman said no tanker will be allowed to dock at Libyan ports without the permission of Faraj Al-Hassi, the head of the NOC in Benghazi.

Blacklisted Cargo

Earlier efforts by the Benghazi authorities to sell crude failed because they couldn’t find buyers. In 2016, a tanker with oil from the eastern NOC was forced to return with its cargo to Libya after the UN blacklisted the shipment and Malta refused to let the vessel dock there.

“There is only one legitimate NOC, recognized by the international community and OPEC,” Sanalla, the chairman of the Tripoli-based state company, said in an emailed statement. “NOC warns companies against entering into contracts to buy oil from parallel institutions. They will not be honored, and NOC will pursue legal action against them by all options available.”

Libya pumped 990,000 barrels a day over the past three months, well below the 1.8 million it produced before an uprising in 2011 that ousted former leader Moammar Al Qaddafi.

©2018 Bloomberg L.P.

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