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INTERVIEW-Libya's NOC wary of broken promises in oil ports deal

by Reuters
Tuesday, 2 August 2016 17:23 GMT

By Rania El Gamal

DUBAI, Aug 2 (Reuters) - Libya's National Oil Corporation, which hopes to more than quadruple the country's oil output by the end of this year, remains wary that promises to reopen blockaded ports could be broken, the NOC chief in Tripoli told Reuters on Tuesday.

Libya's U.N.-backed government has signed a deal with an armed brigade controlling the major Ras Lanuf and Es Sider oil ports to end a blockade and restart exports from the terminals, which have been shut since December 2014.

Reopening the ports would be a huge step for the North African state, which since the 2011 fall of Muammar Gaddafi has slipped into chaos that has cut its oil output to less than a quarter of pre-2011 levels of 1.6 million barrels per day.

Details of the deal between the U.N.-backed Government of National Accord (GNA) and the Petroleum Facilities Guard (PFG) to reopen the eastern ports of Ras Lanuf, Es Sider and Zueitina, have not been made public, but the GNA said they included an unspecified amount for PFG salaries.

NOC said on Sunday it welcomed the "unconditional" reopening of blockaded oil ports, adding it would begin work to restart exports from the terminals.

But the deal had been questioned by NOC's Chairman Mustafa Sanalla, who had warned against rewarding groups that shut down production and complained that the NOC lacked funds for its own operating budget.

"According to the information we have there is no written agreement ... we in the NOC must work within the framework of the Libyan law particularly when it is related to the payments," Sanalla, long-time chairman of the NOC, told Reuters on Tuesday in a telephone interview.

"Let's not forget that in the past there have been agreements with the Petroleum Facilities Guard ... and all those promises have been broken before despite receiving a lot of revenue in hundreds of millions ... we always watch and monitor what will happen because the old path had broken promises."

He said there have to be clear regulations and oversight by the different Libyan organisations and parliament to monitor the payments made to the PFG.

Sanalla said Libya's crude oil production was now at around 200,000 barrels per day and exports were at a trickle.

"Yesterday the production was 198,000 bpd. We send 100,000 bpd to local refineries and the rest is for exports," he said.

The NOC had said the GNA had released money allowing it to raise production by 150,000 bpd within two weeks. The NOC aims to gradually increase output to 900,000 bpd by the year-end.

Most of the initial increase would come from NOC's largest subsidiary, Arabian Gulf Oil Company (Agoco). Agoco said last month that the eastern Sarir oilfield, which normally produces about 100,000 bpd, remained closed as the company waited for funds to fix equipment and pay off debts.

"Production will rise gradually ... within two weeks we are aiming to reach an increase of 150-200,000 bpd. This is of course conditioned with the receiving the money owed to NOC," Sanalla said.

NOC was also in talks with local groups and national oil companies to restart other closed oilfields such as El Sharara and El Feel which together would add 450,000 bpd to output.

"I am always optimistic. The situation is difficult but could be solved."

Sanalla said the NOC would not lift the force majeure at export terminals unless it received operational funds from the government and guarantees from all parties that if it was lifted, NOC would not have to impose it again.

"If we have lifted the force majeure and were not able to export we will be in a very embarrassing situation and we are trying to avoid this to keep the credibility of the NOC intact," he said.

To reopen ports: "NOC will open discussions with our international oil company partners to indemnify NOC from liability before lifting the force majeure."

OPEC member Libya has been in turmoil for years, with rival governments and complex alliances of armed groups vying for power and a share of the country's significant oil wealth.

In a letter seen by Reuters to U.N. Libya envoy Martin Kohler and a number of oil and diplomatic officials, NOC's Sanalla said it was a mistake to reward Ibrahim Jathran, head of the PFG for the oil ports blockade.

Asked whether he was worried he could be being pushed out after standing up publicly against the deal with the PFG, Sanalla said: "I don't rule out being pushed away from the board because of my position sooner or later."

"I don't regret what I did, because the most important thing is to serve the Libyan people and prevent NOC from collapsing."

(Reporting by Rania El Gamal, editing by David Evans)

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