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Libya’s NOC demands demilitarization of oil sector as talks to restart output continue

Libya’s state-owned National Oil Corp. reiterated on Sept. 18 that it will not lift force majeure on crude exports from the blockaded oil terminals unless these facilities are demilitarized.

This statements come amid reports that talks between the UN-backed Government of National Accord and the self-styled Libyan National Army brokered by Turkey and Russia were making progress.

Sources also told S&P Global Platts that negotiations to restart the bulk of Libya’s crude output and end the eight-month long blockade on the country’s oil exports were continuing, with the issue of the distribution of oil revenues still being ironed out.

NOC Chairman Mustafa Sanalla conceded that the negotiations to reach a deal included a clear and transparent plan, but unless foreign mercenaries and armed groups left these facilities, a deal was not on the cards.

“All armed groups… must leave all oil fields and ports and make them demilitarized zones. Otherwise, any agreement is a path of imagination.”

The North African oil producer has been wracked by conflict between the GNA and LNA that has almost completely halted oil output.

On Jan. 18, eastern tribes, supported by the LNA, halted exports from five key oil terminals, which dramatically reduced the country’s crude production, pushing it to the lowest since the 2011 civil war.

Libya is currently pumping around 120,000 b/d compared with around 1.10 million b/d before the blockade.

‘Foreign meddling’

Sanalla has repeatedly called out foreign powers and foreign mercenaries for meddling in the country’s oil sector, accusing them of preventing the North African producer from restarting production.

“In light of the current chaos and non-organized negotiations, force majeure can’t be lifted,” Sanalla said. “We have more than fifty tanks filled with hundreds of thousands of tons of highly flammable and explosive hydrocarbon materials, and we have foreign mercenaries inside these facilities, and force majeure cannot be lifted in the presence of these foreign mercenaries,” he added.

Sanalla singled out the Russian Wagner security group, which are present at many of Libya’s oil facilities.

“We will not allow the Wagner mercenaries to play a role in the national oil sector,” he added.

NOC lambasted the politicization of the oil sector, which has been used as a “bargaining chip in futile negotiations to achieve political gains.”

Growing pressure

Despite some talks moving in a positive direction, analysts remain wary of an imminent production restart.

“A field-level restart will ultimately hinge on a mutually accepted oil-revenue sharing deal by LNA’s Khalifa Haftar and his foreign backers [the UAE in particular, but also Russia and Egypt], and a shift in military dynamics on the ground,” S&P Global Platts Analytics said in a recent note.

Platts Analytics forecasts Libyan crude output to reach 365,000 b/d by December, including 300,000 b/d from onshore western fields, but eastern exports (which have 800,000 b/d capacity) won’t begin until April 2021.

LNA’s leader Khalifa Haftar is coming under international pressure to the lift the oil blockade.

The US embassy in Tripoli said in a statement on Sept. 12 that the LNA has promised to reopen the country’s energy shipments following talks after it had imposed an oil blockade in mid-January. But LNA spokesperson Ahmed al Mismari branded the US statement as “optimistic.”

While GNA Prime Minister Fayez al-Sarraj said this week he would step down by the end of October to enable the transition and move towards elections.

Libya holds Africa’s largest proven reserves of oil and its main light sweet Sharara and Es Sider export crudes yield a large proportion of middle distillates and gasoline, making it popular with refineries in the Mediterranean region and Northwest Europe.
Source: Platts

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