CONTENT PREVIEW
Country Risk

Intensifying disputes over rights to issue contracts, sell Libyan oil and fighting around energy sites likely

27 July 2018
The National Oil Corporation (NOC) of Libya's building in the capital, Tripoli, on 16 July. It is unlikely to recognise oil contracts issued by the NOC in Benghazi. Source: Mahmud Turkia/AFP/Getty Images

Key Points

  • An attempt by the National Oil Company (NOC) of Libya in Benghazi to issue its own contracts for the sale of oil would raise the likelihood of legal disputes over Libyan energy contracts and associated payments and receipts, and would likely pave the way for future litigation over authority to sell Libyan oil.
  • Competition over the authority to sell oil would increase the incentive of Tripoli-based militias and their allies to capture and control the Gulf of Sirte.
  • The NOC in Benghazi successfully selling some of Libya’s oil independently would further raise risks to oil fields in southern Libya outside its control, particularly Sharara and El Feel.

Event

Libya’s National Oil Company (NOC) in Benghazi, which competes with the internationally recognised NOC in Tripoli for legitimacy, is likely to attempt to issue its own contracts for the sale of oil in October, when existing contracts expire; the Tripoli-based NOC is unlikely to recognise these.

The Libyan National Army (LNA) declared on 25 June that it plans to hand over management of Libya’s oil fields and export terminals to the NOC in Benghazi, which was supported by the government of Prime Minister Abdullah al-Thinni and the Tobruq-based Libyan Parliament. This followed attacks on oil ports between Sirte and Ajdabiya by the rival former Petroleum Facilities Guards leader Ibrahim Jadhran. LNA supporters claim that Jadhran was backed by the Government of National Accord (GNA), or factions within Tripoli, although the GNA was quick to condemn his actions. The LNA backtracked on 11 July, and once again recognised the authority of the Tripoli-based NOC.

IHS Markit sources report that the NOC in Benghazi will try to assert its authority and undermine the Tripoli-based NOC’s control of oil-sector production and sales, by offering formal contracts as part of the NOC annual bidding on oil sales in October 2018.

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