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Is Libya Facing A New Oil Crisis?

Tsvetana Paraskova

Libya’s National Oil Corporation (NOC) condemned on Thursday the setting up of a parallel board of directors at one of its key subsidiaries, fuel distributor Brega Petroleum Marketing Company (BPMC), saying that attempts at politicizing the oil sector puts Libya at risk of partition.

BPMC, which is based in eastern Libya, has seen some board members break away and accuse parent company NOC of deliberately cutting jet fuel and kerosene supply to the eastern part of the country, controlled by eastern strongman General Khalifa Haftar.

Sources in Libya told S&P Global Platts on Thursday that a break-away parallel firm could create a dangerous precedent of a company in the east trying to market fuel independently from NOC, which is the only legitimate exporter and importer of fuel and crude oil.

“NOC rejects any attempts to partition and politicize Libya’s oil sector to serve narrow interests and foreign agendas. Fuel supply to the Eastern and Central regions is more than adequate for civilian purposes. The real motive behind this attempt is to set up a new illegitimate entity for the illegal export of oil from Libya,” NOC’s chairman Mustafa Sanalla said in a statement on Thursday.

“Let us be clear, if NOC loses its oil export monopoly, the future integrity of Libya is at grave risk,” Sanalla noted.

“NOC is exploring all legal and diplomatic measures, and puts all companies operating on the oil market on notice that any attempt to deal or sign contracts with this false company is a clear violation of Security Council resolutions,” the state oil firm’s chairman said.

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A serious internal conflict within Libya’s already fractured oil sector could, once again, result in volatile oil production levels from one of the wildest cards in the oil market in the past half-decade.

The security situation in Libya has worsened since the spring after eastern strongman General Khalifa Haftar ordered in early April his Libyan National Army (LNA) to march on the capital Tripoli. The self-styled army has been clashing with troops of the UN-backed government in a renewed confrontation that has escalated and disrupted, once again, Libya’s oil production and exports.

Two outages at the biggest oil field Sharara in one month forced Libya’s oil production down to below 1 million bpd in the first week of August—the lowest level in five months and a sign of Libya’s wild card status in terms of production consistency. The outage at Sharara resulted in Libya’s average crude oil production declining by 21,000 bpd month on month in August, to 1.056 million bpd from 1.078 million bpd in July, according to OPEC’s secondary sources.

By Tsvetana Paraskova for Oilprice.com

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