Haftar and the Libya National Army have declared that NOC East is now the body responsible for handling the export of the crude through five key ports – Ras Lanuf, Es Sider, Zuetina, Hariga, and Brega. Buying Libyan crude from a company other than NOC violates a 2014 UN Security Council Resolution. As a result, exports from these ports have stopped and production is shutting in. NOC confirmed that 850,000 b/d of production will come offline, bringing Libya’s crude production down toward 150,000 b/d. It’s early to say, but we estimate this disruption will last three to six weeks.
Disruptions of global oil supply keep piling on. Libya National Oil Company confirmed that 850,000 b/d of crude production and 20,000 b/d of condensate production are offline in Libya. This morning, July 2, NOC declared force majeure at the Hariga and Zuetina terminals in the east, adding to the force majeure previously declared at the central ports of Ras Lanuf and Es Sider. Storage tanks are full, forcing producers to shut in fields. When Haftar and the Libya National Army took back control of the Es Sider and Ras Lanuf ports in mid-June, we expected
the damage to storage tanks would remove a cushion for inventories but that the 450,000 b/d of exports that run through those terminals would resume within a few weeks.
Instead, the LNA claimed on June 29 that NOC sends a portion of oil revenues to Chad mercenaries rather than Libya’s Central Bank. As a result, they have decided to give control of the ports to NOC East, an unrecognized body based in the eastern territory that the LNA holds. This transfers the marketing of another 350,000 b/d of Libya’s crude over to the NOC East, since they control the terminals of Zuetina and Hariga in the east. Selling crude from NOC East, not NOC, would violate a 2014 UN Security Council Resolution, which extends through November 2018. Still, Haftar and the NOC East are in a strong position given the ongoing disruptions in Iran and Venezuela. Going forward, one possibility is that illicit sales go unpunished and the ban breaks down. This would allow crude exports to resume but indelibly mark the deep rift in the country, increasing the likelihood of future violence and accompanying disruptions. More likely, however, is that buyers of Libyan crude will stay away from the east-controlled ports while Haftar cuts a deal that increases the east’s share of Central Bank revenue or improves his territorial control.
There is pressure for this to be resolved quickly from the NOC and external western actors, like the US, UK, France, and Italy. And although Haftar has a strong militia and support from the UAE and Egyptian militaries, he is under pressure to obtain revenue for the Eastern government based in Tobruk, his main base of support. It’s difficult to say how long force majeure might last, but we estimate that most of the 850,000 b/d will return to the market in three to six weeks.