5 min read

Force Majeure declared at Marsa al Hariga- Libya

Featured Image

Libya's National Oil Corp (NOC) declared force majeure on exports from the port of Marsa al Hariga after Arabian Gulf Oil Co suspends output over a budget dispute. 

TRIPOLI, April 19 (Reuters) - Libya’s National Oil Corp (NOC) declared force majeure on Monday on exports from the port of Hariga and said it could extend the measure to other facilities due to a budget dispute with the country’s central bank.

Daily lost income “may exceed 118 million dinars ($26 million)”, NOC said in its statement.

Arabian Gulf Oil Co (AGOCO), the NOC subsidiary which runs Hariga, said on Sunday it had suspended output because it had not received its budget since September. Its Hariga port manager and an oil engineer said production had been reduced.

NOC said the Central Bank of Libya (CBL) had refused to finance the oil sector for months, adding that “this painful reality may extend to the rest of the companies”.

Libyan oil output was halted for much of last year after eastern-based forces in the country’s civil war blockaded oil terminals, causing NOC to declare force majeure on all exports.

Production resumed after a deal that emerged after fighting ended last summer, but before the major peacemaking effort that has led to a new unity government.

Source: Reuters


NOC OFFICIAL statement

The National Oil Corporation (NOC) announces a state of force majeure as of April 19, 2021 for the interruption of producing and exporting of crude oil shipments through the port of Hariga, and this announcement comes as a result of the Central Bank of Libya's refusal to liquidate the oil sector budget for long months, which led to an exacerbation of the indebtedness of some companies and on the top of which is the "Arabian Gulf Oil Company", which made it lose the ability to fulfill its financial and technical obligations and forced it to reduce the country's production of crude oil by about 280 thousand barrels per day.
While the National Oil Corporation understands the motives of the suspension which is outside the control of the company and seeks an excuse for the government of National Unity due to the delay in approving the budget for the year 2021, it places full legal responsibility on the Central Bank of Libya, which refused to liquidate the financial arrangements approved in accordance with the decision of the former Government of National Accord No. 871 of November 30, 2020, estimated at about 1.048 billion dinars, and it accounted for the disbursement of oil revenues on illusive credits and unnecessary goods, according to its issued reports
While the National Oil Corporation strongly denounces the Central Bank's blocking of the financial arrangements necessary for the continuation of its operations, it does not support taking any action that would harm the higher national interest of the country, and affirms 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. And everyone remembered that what the Central Bank is doing is to jump over 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.
And based on the foregoing, the National Oil Corporation reminds 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 as 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 had to inject into development and at actual market prices.
As the National Oil Corporation regrets what has happened, and with a great concern, we announce that the oil sector is in trouble more than ever, especially the national companies that are suffering and groaning. We expect that this painful reality may extend to the rest of the companies, and we warn the inevitability of stopping flights due to the accumulation of indebtedness on the oil airline and field supply companies, as the technical situation of the aircraft reached a dangerous degree, which led one of the aircraft to stop in Cairo for maintenance, whose value could not be paid for months, and the supply debt also reached about 100 million dinars. This 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 National Oil Corporation is committed to doing everything that would maintain the current production rates, provided they comply with asset safety standards and requirements, and this matter is appreciated by the Maintenance and Projects Department at NOC and its subsidiaries.
It is worth mentioning that what has been received to date is less than 2% of the needs of NOC and its companies to achieve the targets set for the year 2021.
Mr. Mustafa Sanalla, Chairman of the Board of Directors of the National Oil Corporation, commented on this by saying:
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 Chairman of the Board of Directors added, "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.
Finally, the National Oil Corporation (NOC) informs the whole Libyan people and the Government of National Unity that the Central Bank of Libya in such actions seeks to politicize the national oil sector through its illegal control of state’s funds, and that the National Oil Corporation, having obtained the government's approval and the approval of Law Department, will resort along with its national companies to especial arrangements in line with the correct law and in light of the apparent incapability of the Central Bank, whose motives we are aware of in managing the current crisis. In parallel, we request 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.
God Bless Libya!
Issued in Tripoli on 19 April, 2021.