East Libya to Punish Oil Companies Backing Rival Government

(Bloomberg) -- Libya’s internationally recognized government plans to boost oil production five-fold and will punish companies working with a rival cabinet striving to control the divided North African nation’s crude deposits.

Oil companies operating in Libya or seeking to do so must register with the National Oil Corp. controlled by the elected government based in the country’s eastern region, Deputy Prime Minister Abdussalam Elbadri said Wednesday at a conference in Valletta, Malta. The NOC will refuse to renew the contracts of any companies that don’t support the elected government, NOC Chairman Nagi Elmagrabi said in an interview in Valletta. The country plans to boost crude output to 2 million barrels a day by 2020, he said.

“We will send letters to all the international companies that operate in Libya asking them to deal with the internationally recognized and legal government,” Elmagrabi said. “We will take measures based on their respective replies to the letter. If they continue to decline to cooperate with the legal government, we will stop their loadings once their contracts expire.”

Africa’s Biggest

Tribal and political disputes have almost completely halted onshore crude output in the western region, where a government backed by moderate Islamist militias has held power since last year. The nation’s elected government is based in the east, where some oil continues to be exported. Libya, with Africa’s biggest oil reserves, pumped about 1.6 million barrels a day of crude before the 2011 rebellion that ended Muammar Qaddafi’s 42- year rule. It’s now the smallest producer in OPEC, producing 355,000 barrels a day in August, data compiled by Bloomberg show.

Coast guard forces loyal to the Islamist-backed government seized a Russia-flagged tanker in Libyan waters that they suspected of involvement in fuel smuggling, Lieutenant Colonel Tawfiq Sakir said by phone late Wednesday. The forces escorted the ship to a naval base in the capital Tripoli, where the crew were being interrogated, he said.

Force Majeure

Like Libya’s political leadership, the NOC has competing eastern and western administrations that are trying to control energy facilities and fields. The NOC’s eastern-based management is seeking to lift force majeure at oil ports in that region, Elmagrabi said in a speech, without giving dates for such a step. Force majeure, a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control, was declared at the ports of Es Sider and Ras Lanuf in December after they came under attacks.

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.