By Sami Zaptia.
London, 20 April 2021:
Libya’s state National Oil Corporation (NOC) announced a state of force majeure as of April 19, 2021 for the interruption of producing and export of crude oil shipments through the port of Hariga.
The NOC said this comes as a result of the Central Bank of Libya’s (CBL) failure over the last months to liquidate the oil sector budget. This, the NOC added, has led to an exacerbation of the indebtedness of some companies and on the top of which is the Arabian Gulf Oil Company (AGOCO), which has made it lose the ability to fulfil its financial and technical obligations and forced it to reduce the country’s production of crude oil by about 280 thousand barrels per day.
NOC places legal responsibility on CBL
The NOC said that while it understands the motives of the suspension which is outside the control of AGOCO and understands the excuse for the Aldabaiba Government of National Unity due to the delay in approving the 2021 budget, it places full legal responsibility on the Central Bank of Libya.
CBL prefers to squander LCs on unnecessary goods
It said the CBL refused to liquidate the financial arrangements (budget) approved by the former Faiez Serraj Government of National Accord (Decision No. 871 of November 30, 2020) estimated at about 1.048 billion dinars, while preferring to spend oil revenues on illusive letters of credit and unnecessary goods, according to the CBL’s own issued reports.
NOC denounces CBL – years-long politicking continues
The NOC strongly denounced the CBL’s blocking of the financial arrangements it said were necessary for the continuation of its operations, but in a veiled threat said it does not support taking any action that would harm the higher national interest of the country. It affirmed that what happens may lead to the state losing its economic balance, and putting it back to square one in terms of closures and low revenues. The NOC reminded all that what the CBL is doing is to jump on the bandwagon of the exceptional efforts made by the oil sector’s workers to restore production to its previous levels – for purposes that do not serve the interest of the national economy.
NOC-CBL tug-of-war: Who decides what is the national interest?
The NOC reminded the Central Bank of Libya of its legal and moral responsibility for all the major technical problems incurred by the oil sector after September 2020, represented by the collapse of some reservoirs and transmission lines, the stoppage of some wells, the impact of oil and gas reservoirs and pollution of some reservoirs. This, the NOC said, was a consequence of the scarcity of budgets and the central bank’s spending “oil revenues” as a commodity granted by the Governor to some merchants at low prices during the year 2020 and the years that have passed, which caused the state to lose billions of dollars that it should have injected into development and at actual market prices.
NOC warns sector is in more trouble than ever
The NOC announced that the Libyan oil sector is in trouble more than ever, with national companies suffering the most. It said it expects this ‘‘painful reality’’ may extend to the rest of the companies, and warned the inevitability of stopping flights due to the accumulation of indebtedness on the oil airline and field supply companies. It reported that the technical situation of aircraft has reached a dangerous degree, which led one of the aircraft to stop in Cairo for maintenance, whose dues could not be paid for months. It also reported that the supply debt has also reached about 100 million dinars. This, it added, has cost the Libyan state effort, time and money that was supposed to be directed towards development to advance the country. Despite all this, the NOC said it is committed to doing everything that would maintain the current production rates, provided they comply with asset safety standards and requirements, a matter that is appreciated by the Maintenance and Projects Department at NOC and its subsidiaries.
NOC only received 2 percent of its needs
The NOC reported that it has received to date less than 2% of its needs to achieve the targets set for 2021.
NOC chairman Mustafa Sanalla said ‘‘We have repeatedly warned of the consequences of ignoring the integrity of the assets of the National Oil Corporation and the serious damage that this measure poses to equipment and surface facilities, as well as a real threat that leads to the destruction of the remaining oil assets and its disastrous impact on the country’s economy’’.
He added that, ‘‘based on professional and moral responsibility, the National Oil Corporation has addressed the Ministry of Oil and Gas and informed it of the deteriorating financial position of the oil sector and the dangers facing it due to the failure to liquidate the necessary budgets’’.
“The situation has been clarified in all its dimensions and its repercussions for the public interest of the country, stressing the right of national companies fully-owned by NOC to receive the financial arrangements approved by the Presidential Council of the former Government of National Accord, especially after the arrangements for lifting the status of force majeure last September, which is costing the general budget as a result of these interruptions hundreds of millions of dollars.
Initial estimates indicate that the daily losses may exceed 118 million Libyan dinars and will negatively affect the revenues of this month of April. They will affect the public treasury revenues, which could have been directed to pay part of the debts of national companies and eliminate part of the suffering of all citizens throughout the country’’.
NOC accuses CBL of politicizing oil sector – to take legal action
The NOC said that the CBL in taking such actions seeks to politicize the national oil sector through its illegal control of state’s funds, and that the NOC, having obtained the government’s approval and the approval of Law Department, will resort along with its national companies to special arrangements in line with the correct law and in light of the apparent incapability of the CBL, whose motives it is aware of in managing the current crisis. The NOC requested the Office of the Attorney General officially, according to this statement, to hold accountable all those obstructing NOC’s operations, directly or indirectly, and to take the necessary legal actions against all who attempts to jeopardize the capabilities of the country and damage Libya’s only source of income.
