Libya’s oil ministry authorises NOC funds: Update
Posted – 24th April 2021
Libya’s new oil and gas ministry has agreed to pay 1.048bn Libyan dinars ($232.5mn) to state-owned NOC to settle a funding dispute that has disrupted 280,000 b/d of crude production capacity.
The ministry said it has already transferred 500mn Libyan dinars to NOC, in co-ordination with the north African country’s ministry of planning. On 19 April, NOC instated force majeure restrictions at the eastern Marsa el-Hariga terminal after its subsidiary Agoco was forced to severely reduce production when a lack of funding prevented it from fulfilling “its financial and technical obligations”.
NOC blamed the Central Bank of Libya (CBL) for the production cut, saying the institution had failed to liquidate 1.048bn Libyan dinars. It did not clarify if this amount was sufficient to meet Agoco’s needs, or whether it would cover a larger portion of NOC’s requirements.
Agoco operates the 200,000 b/d Sarir and Mesla fields, along with the smaller Hamada, Nafoora, al-Bayda and Majid fields — giving it total capacity of around 280,000 b/d, according to NOC and Libyan sources. The Marsa el-Hariga terminal remained closed as of this morning, according to Libyan shipping reports. At least two other tankers were set to load from the port by the end of the month, trading sources indicated.
The short-term outlook for Libyan crude output remains volatile. A second NOC subsidiary, Sirte Oil, said yesterday that it informed NOC it would have to lower, then completely stop production within 72 hours because of its “very critical financial situation” and the “scarcity of the operational and capital budget that has not been liquidated for more than seven months”. Sirte Oil, which can produce around 100,000 b/d, said it was unable to fulfil obligations to its contractors, and had accumulated financial debt and a shortage of spare parts.
Meanwhile, security forces that protect NOC’s assets could disrupt production further. The Petroleum Facilities Guard (PFG) branch posted at the western 300,000 b/d El Sharara field vowed to stop field production and exports if it is not reimbursed for field allowances, a wage component that tops up base salaries. That deadline expired yesterday. PFG branches at the Es Sider and Ras Lanuf terminals in eastern Libya have issued a similar threat, with a 25 April deadline.
The calls for additional funding come at a time when Libya’s new Government of National Unity (GNU), which took office last month under premier Abdelhamid Dbeibeh, is seeking to push through a long-stalled budget bill for 2021. Libya’s legislative body, the House of Representatives (HoR), sent back a draft proposal earlier this week, requiring revisions.
NOC chairman Mustafa Sanalla said today that Libya’s oil production has decreased to 1mn b/d from 1.3mn previously, without giving a timeframe, and that it could decline further because of budgetary issues. It is unclear whether this figure includes condensate output. Argus estimates monthly Libyan crude output has topped 1mn b/d since November, reaching 1.19mn b/d in March. Libyan crude exports were 1.14mn b/d last month. Libya is critically dependent on oil revenues, with NOC reporting crude sales of $1.915bn in March.
The UN Support Mission in Libya (UNSMIL) expressed its “concern at the recent shutdown in oil production at Marsa al-Hariga and indications that other shutdowns may be imminent”. The UN has been overseeing negotiations to establish unified governance in Libya ahead of presidential elections on 24 December this year. It has supported NOC in the past when the company has been at odds with political factions or has been deprived of control over its assets because of military action. “It is incumbent on all parties to ensure that the NOC remains an independent, technocratic, well-resourced institution and to ensure the transparent and equitable management of resources,” UNSMIL said.
ARGUS – Ruxandra Iordache
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