By Chris Stephen

Libya’s plans to lift oil production to 1m barrels a day this summer hit another political obstacle after the eastern government ordered deliveries handled by Swiss-based Glencore to halt because of its connection to Qatar.

The order affects approximately 190,000 b/d of oil extracted from the Sarir and Misla fields, in southeast Libya, and exported from Tobruk’s Hariga port.

A 14 June statement from Abdullah al-Thinni, prime minister of the Bayda-based government in the east (a rival to the UN-appointed Government of National Accord in Tripoli), ordered operators to halt crude exports and cancel deals with Glencore or any other business that has links with Qatar.

The Qatar Investment Authority, the nation’s sovereign wealth fund, has a nine-percent stake in Glencore, which has an exclusive contract with Libya’s National Oil Corporation (NOC) to buy exports from Hariga.

Thinni’s order is primarily directed at Arabian Gulf Oil Company, a unit of NOC, which operates Hariga, Sarir and Mesla.

Agoco said on Wednesday it had yet to receive the order—and output has not ceased—but executives are mindful of Thinni’s threat of prosecutions if the instruction is not followed.

The eastern government has accused Qatar of backing militias opposed to it, and has followed allies Saudi Arabia, the UAE and Egypt in their commercial embargo of the emirate.

Nagi Maghrabi, chairman of the eastern branch of NOC—which has repeatedly sought to carve out an independent eastern oil-export business by offering discounted oil sales to small shippers—accused Qatar of “financing terrorists” in Libya through Glencore sales.

Mustafa Sanallah, chairman of the official NOC, appealed for the order to be ignored, saying in a statement on the company’s website: “This will only bring suffering to the Libyan people. It will reduce our national revenues and our ability to pay for vital commodities.”

Sources close to NOC said the east was making another attempt to cleave Libya’s oil sector and was offering cut-price oil deals to a host of small private traders willing to defy Tripoli, NOC and the UN.

The latest political flare-up puts in peril Sanallah’s ambitious plan to lift Libyan exports to 1m b/d. Production has risen quickly in recent months in the teeth of continuing civil war between forces loyal to the eastern government and militias backing parts of the GNA in Tripoli.

Exports have been steadily rising since eastern army commander Khalifa Haftar captured four central ports, including Libya’s largest terminal, Es-Sider, last September, ending a two-year blockade. That capture also gave the eastern government control of the Sirte Basin, once home of two thirds of Libyan production.

In the spring, militias in southwest Libya lifted a blockade on Libya’s biggest producing field, Sharara, following an appeal from Sanallah, and the country’s production this month reached 0.83m b/d—about three times the output level last August.

That figure is well short of the 1.6m b/d Libya enjoyed before the overthrow of Muammar Qadhafi in 2011, but is the highest total since civil war broke out in July 2014.

Easing tensions

Until the latest attempt by the eastern NOC to interrupt flows, the prospects for further rises looked sound. On 13 June, Sanallah announced an end to a standoff with Germany’s Wintershall, whose 35,000 b/d of production was halted in May in a dispute over the company’s contract. Wintershall’s concession had expired and NOC had sought to transfer it to a more recent production-sharing agreement. The resolution of the dispute should allow for an increase in output.

But the Glencore problem may be a harder nut to crack, because it has been controversial since the outset. Sanallah signed the Glencore deal in November 2015 despite objections from eastern Libya, and says a major trader was necessary to assume risks associated with lifting Libyan oil.

Eastern authorities complain that while two-thirds of oil is produced in the Sirte Basin, in eastern Libya, revenues flow to the Central Bank under GNA auspices in Tripoli. Recent military advances have left eastern forces in control of much of central and southern Libya.

Glencore has not yet commented on the order, and reports from Tobruk say on Thursday loadings were proceeding as normal. The east does not have a united position on the idea of independent oil exports either.

Tellingly, Field Marshal Hafter has not endorsed the plan. Other politicians in Tobruk are thought to be opposed to it too. In a letter this week to the Bayda Government, Sanallah referred to Haftar’s decision to let ports trade freely in contrast to some militias who have demanded what amounts to protection money to allow them to operate: “We respect the Libyan National Army General Command for its responsible opposition to port blockades… I hope you (Bayda) will take notice of their wise position on this matter.”

Sanallah also warned against eastern Libya trying to sell oil independently of NOC. On the two occasions when eastern authorities have tried to do so, the tankers were blocked on the high seas, once by US Navy Seals in 2014 and last May by an order from the UN Security Council.


Chris Stephen – Libya + Tunisia Correspondent, The Guardian. Author, Judgement Day: The Trial of Slobodan Milosevic (Atlantic Monthly Press)


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