East Libya to Punish Oil Companies Backing Rival Government

The elected government is taking measures to secure its revenue from oil sales. The government opened an account last month at the Arab International Bank in Cairo where it can receive payments in foreign currency, Ali Hebri, the eastern- based central bank governor, said in an interview. Authorities can transfer money from this account to the central bank in the city of Al Bayda, the eastern government’s seat of power, he said. 

The central bank sees crude prices, which tumbled by about 50 percent last year, dropping below $40 a barrel, Hebri said. Brent crude, a global benchmark, was trading at $49.95 a barrel at 6:55 a.m. Thursday in London. 

The price slide, along with Libya’s turmoil, is discouraging foreign investors, and the country will need at least two years to attract the investment it needs to increase output beyond 1.6 million barrels a day, Hebri said.

'Philosophy' Faulted

Companies that support the internationally recognized government will be rewarded and given priority in future energy contracts, Mahdi Khalifa, an NOC board member, said at a news conference in Valletta. Any oil companies that refuse to cooperate with the government face the risk of legal action, he said. “We will give them time to review their position, and then we will take them to arbitration,” Khalifa said.

About 30 foreign companies signed up to attend the conference in Malta’s capital, though officials declined to identify them. “The major oil companies stayed away” because they don’t want to appear as if they’re taking sides in Libya’s political struggle, Khalifa said.

“This philosophy of ‘you’re either with us or with them’ is not going to work,” said Edward Loyd, chief executive officer of Loyd Capital Management LP, an oil-industry investment company with headquarters in Newport Beach, California. “There is no harm in registering with the government that is recognized by the U.S. government, but the U.S. majors that stayed away from this event and that continue to deal with Tripoli are not willing to rock the boat and change how they operate in Libya if there is no agreement by the two sides.” 

No Consensus

United Nations-sponsored talks held in Morocco to form a united government hit a snag when the internationally recognized cabinet said on Tuesday it had recalled its team after their rivals insisted on re-opening and adjusting the text of the agreement. The two administrations can’t agree on the composition of a presidential council and won’t reach a consensus before next week on forming a unity government, said Elbadri, the deputy prime minister.