January 30, 2018 / 6:18 PM / in a year

UPDATE 1-NOC chief says investment key to rebuilding Libyan oil flows

(Recasts, adds quote)

By Ahmad Ghaddar

LONDON, Jan 30 (Reuters) - OPEC member Libya’s ability to rebuild its oil output will be hindered by constraints on National Oil Corporation’s (NOC) budget, the NOC chief said on Tuesday, saying he feared attempts to use the budget to control the state oil company.

NOC received only 50 percent of its capital expenditure budget from the Libyan government in 2017, Mustafa Sanalla told a Chatham House conference in London on Tuesday.

“In terms of investment, we assume that this year, as in 2016 and 2017, political actors will attempt to use control of the state budget process to control NOC,” Sanalla said.

Crimping the budget of NOC, which employs more than 60,000 people and helps pay the salaries of most workers in Libya, made no sense because investment in increased oil production paid rapid dividends, he said.

Under Libyan law, NOC hands over oil revenues to the Central Bank and is then allocated its budget by the Libyan government.

Any further investments and any attempts to raise production will be closely watched by the Organization of the Petroleum Exporting Countries.

Libya told OPEC in November there was still a lot of uncertainty around its production levels but that its 2018 output is likely to remain around 1 million barrels-per-day.

Libya’s pre-civil war oil capacity stood at around 1.6 million bpd.

“If NOC is lost, Libya will take a long time to be put back together,” Sanalla told the conference.

While NOC has to a large extent succeeded in raising production levels in recent months by negotiating with various groups to end port and pipeline blockades and raise oil output, security threats to infrastructure remain.

He said much of Libya’s security problems including fuel smuggling and blockades of export and production infrastructure, is “the result of perceptions of unfairness, amplified by perceptions of corruption at the centre, and an almost complete lack of transparency about the way the benefits of the state are distributed”.

Sanalla said he was hopeful that further blockades in the east of the country would be avoided, expressing faith in the Libyan National Army (LNA) which ended a blockade by the forces of Ibrahim Jathran on key export ports in September 2016.

“I don’t believe the LNA and its leadership will now allow the tactics of Jathran to be used under their supervision, especially because of their devastating economic effect.”

The LNA is the dominant military force in eastern Libya, led by military commander Khalifa Haftar. (Additional reporting by Aidan Lewis in Tunis; editing by Alexander Smith and Adrian Croft)

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