A struggle has broken out for control of Libya’s state-run energy sector as rival governments in Tripoli and the east compete for power, but a common interest in maintaining oil revenues will keep exports flowing for now.
Libya is divided between a rump state in the east, where Prime Minister Abdullah al-Thinni’s government and the elected parliament hold court, while Tripoli and central Libya are held by brigades allied to the western city of Misrata, which have taken control of the capital and set up an alternative parliament. But despite the struggle that is dividing towns, tribes and armed groups, officials at the National Oil Corporation say oil exports have not been affected. The conflicting parties need to keep the oil money, Libya’s only source of income, flowing.
Revenues from oil export sales are being paid into a state-owned bank abroad. The money is then remitted to the central bank in Tripoli, which pays the salaries of thousands of public employees on both sides of the new political divide.
“There is probably a big disincentive to disrupting the oil payments system, and payments will probably continue to get paid into the central bank,” said one Western diplomat.
That helps explain why oil production has risen despite the general chaos. Libya now pumps at least 800,000 barrels a day, four times more than five months ago, when Thinni’s government managed to end a rebel blockade of oil ports in the east.
Still, the industry remains highly vulnerable as armed groups, often unaffiliated to political parties, seize oilfields or ports to press authorities to meet their inancial demands.
Another potential difficulty is that the struggle to control the National Oil Corporation and the central bank might make foreign traders reluctant to buy Libyan oil if they cannot figure out who owns it.
Earlier this year, the UN banned the sale of oil not authorised by the National Oil Corporation when rebels campaigning for regional autonomy were trying to sell crude from seized eastern ports.
“Personally, given the reality on the ground of two parliaments, two governments... the UN should consider putting such a freeze on all Libyan assets and transactions until the picture is clear as to who is really in charge of Libyan sovereign assets,” said Hafed al Ghwell, a political analyst.
There is probably a big disincentive to disrupting the oil payments system
Husni Bey, head of one of Libya’s largest private conglomerates, said the poor state of the public finances due to armed men disrupting oil production earlier this year, and a fall in oil prices, had forced all sides to cooperate in order to keep oil sales going.
Oil revenues would be as low as $28 billion in 2014, half last year’s level, he said.
Ghwell said the central bank would have to burn more foreign currency reserves to fund the budget of $40 billion and annual imports of $30 billion.
Highlighting the challenges, the National Oil Corporation has called on oil workers to maximise production to offset the fall in oil prices.
With that financial dilemma, the competing powers are leaving National Oil Corporation technocrats to handle routine issues such as issuing tenders.
“Work is going very normally,” said Omran al-Zawie, spokesman for the Arabian Gulf Oil Co, a subsidiary of the National Oil Corporation running export ports in the east.
Analysts say another reason why Tripoli’s new rulers have not tried to shake up the National oil Corporation is that up to 70 per cent of oil production comes from the east, where Thinni’s government is still in charge of export terminals.
Bey said oil revenues are booked abroad in an account of the state-owned Libyan Foreign Bank, which transfers the money to the central bank.
The central bank, trying to stay out of the conflict, has stopped all budget payments except salaries to public employees and essentials such as wheat imports.