September 2, 2015 / 11:31 AM / 4 years ago

Analysis - Eastern Libya struggles to attract oil buyers in row with Tripoli

CAIRO (Reuters) - Libya’s official government is struggling to woo oil majors in a bid to control oil revenue and force a rival Tripoli government into a U.N. peace deal because foreign clients are wary of breaking with the established state energy firm in the capital.

Pipes are pictured at the El Sharara oilfield December 3, 2014. REUTERS/Ismail Zitouny

The battle over Libya’s oil resources is at the heart of a conflict between two governments and parliaments allied to a host of armed groups fighting for power four years after an uprising ousted leader Muammar Gaddafi.

The internationally recognised government, based in the east since losing Tripoli a year ago, wants oil firms to discuss purchase contracts with its own officials instead of the state oil firm based in the capital, which is held by a rival group.

So far foreign oil buyers have sought to ignore the conflict by continuing to pay through the state’s National Oil Corp (NOC) and the central bank in Tripoli, using a system in place for decades under Gaddafi.

By appointing its own NOC management and inviting firms to a conference in Dubai, the east has escalated the dispute to put pressure on the rival government in Tripoli to agree on a national unity government, oil insiders and entrepreneurs say.

A rival assembly in Tripoli known as the General National Congress (GNC) has refused to sign a preliminary deal brokered by the United Nations, stymieing an accord Western powers say is the only way out of the country’s chaos.

“It is the only card left unplayed to force the GNC to reason for the best of Libya and accept a government of national unity,” said Husni Bey, a prominent entrepreneur. If the GNC won’t agree then the east wants to exert pressure by seizing oil revenues, Libya’s lifeline, he said.

Pressure has been building on eastern-based premier Abdullah al-Thinni, who is fighting irrelevance as his cabinet works in a remote eastern city, issuing decisions ignored by Tripoli ministries reporting to the rival administration.

Thinni’s status as head of the internationally recognised government would not give his officials the right to claim ownership of oil reserves, said Mattia Toaldo, policy fellow at the European Council for Foreign Relations.

“Both the U.S. and all of the EU have said over and over that they will not recognise any parallel economic institution,” he said. “Big oil payments go through systems such as SWIFT which, for the moment, are controlled by the EU and the U.S.”

Thinni had already demanded in March that oil exports be paid for through new bank accounts in Dubai but no buyer has signed any deal because of legal concerns about proof of ownership. Contracts and geological data are stored at NOC Tripoli.

In the invitation to the Dubai conference, the eastern NOC chairman Naji al-Maraghi pointed out to oil firms that the state firm was based in the eastern city of Benghazi; not Tripoli, where several hundred staff work.

But no NOC unit works out of Benghazi, as the city has been a battle zone between government forces and Islamist groups since last year. Maraghi works out of Bayda, Thinni’s seat.


The U.N. is pushing the warring parties to form a unity government this month because the mandate of the House of Representatives, also based in the east, ends in October. With no deal, the question of who represents Libya will become even more blurred and might further fuel the conflict.

People in the east have been asking Thinni to take hold of oil revenues, because 60 percent of Libya’s oil exports come from the eastern Hariga and Brega ports while payments go to Tripoli.

The central bank in Tripoli, which has tried to stay out of the struggle, says it serves the whole country. But life in the east has become even harder as fighting disrupts deliveries of central bank banknotes and imports of food and petrol.

Oil insiders say Thinni’s government appointed Maraghi as eastern NOC chairman because he is more forceful than his predecessor Mabrook Abu Seifi, who was fired.

Both come from the Maghraba tribe of Ibrahim Jathran, a former anti-Gaddafi rebel commander who controls key eastern oil ports and leads a force pushing for more autonomy in the east. He tried to sell oil on his own in 2014 before making peace with Thinni.

“Naji persuaded Jathran that he can sell oil,” said a Libyan oil insider who used to work with Maraghi at a state oil firm. “He has ambitions but I am sure the Dubai conference will fail.”

On Friday, the eastern NOC said in an invitation riddled with English-language spelling mistakes it had delayed the conference planned for Tuesday by two weeks, saying firms needed more time to send managers.

NOC in Tripoli has fought back, meeting 26 foreign oil firms last week, its chairman Mustafa Sanallah said. It published a picture showing him and nine other people sitting in a meeting room.

“NOC Bayda (which hardly has a real structure) has repeatedly failed to attract a single oil company,” Toaldo said. “Large corporations prefer to stick to contracts and to deal with NOC in Tripoli, with which they have dealt for decades.”

Editing by Patrick Markey and Dale Hudson

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