SOURCE: The Times 26 January 2021: https://www.thetimes.co.uk/article/london-hub-to-play-central-role-in-libya-s-oil-expansion-0l9dp0jwb?shareToken=2a4b5ed674644494cf441bcd370839a7
Libya’s national oil company is to open a hub in London that will award consultancy and asset management contracts worth hundreds of millions of pounds over the next several years to British companies.
The Mayfair office, scheduled to open in March or April depending on pandemic controls, will be the “final gateway for Libyan investment decisions” as the country embarks on an ambitious project to increase oil production to 2.1 million barrels a day, Mustafa Sanalla, chairman of the National Oil Corporation, said.
Libya, which has suffered years of conflict, is exempt from Opec production quotas. The country is producing about 1.3 million barrels a day and expects to add up to 80,000 more barrels by April as additional fields are refurbished or opened, although Mr Sanalla said that these would be operating at 25 per cent to 50 per cent of capacity.
Production slowed to a trickle in 2020 after Marshal Khalifa Haftar, the former Gaddafi-era general who controls the east of the country, imposed a blockade on fields and terminals as he tried to battle his way into Tripoli. The blockade lasted nine months and cost Libya more than £6.5 billion in revenues. Recovery since then has been swift, but production is still below the 1.6 million barrels a day pumped out before Muammar Gaddafi, the former dictator, was ousted in 2011.
Mr Sanalla said that the London office should play a big role in upgrading Libya’s oil industry. Tenders would be announced for consultancy, portfolio management and capacity building services, he said. “There will be an agreement with well-known British companies, the large well-known companies in all specialisations, whether engineering or reservoir studies, specifically. And chain supply will be from London, over the medium term.”
The NOC has another hub in the United States, but Mr Sanalla, speaking in Tunisia’s capital during a visit for meetings, said that Britain was highly valued by the corporation. “You know that London is the heart, although it’s now out of the European Union, it’s a hub. It will be very active,” he said.
“I don’t think we have anyone in a leading position in the oil sector who did not study in Britain. especially in Robert Gordon University [in Aberdeen]. All my colleagues studied there.”
The NOC chairman, who has been in the role since 2014, said he hoped that BP would return in force to Libya now that the political situation was settling.
Marshal Haftar, backed by Russian mercenaries and the United Arab Emirates, launched an offensive in 2019 to unseat the internationally recognised government in Tripoli. A Turkish military intervention helped to repel his forces and the United Nations is negotiating a peace agreement under which the divided country would hold elections in December.
BP signed a memorandum of understanding in October 2018 with the NOC and Eni, the Italian oil major, to resume exploration in its Libyan blocs, with Eni acquiring a 45 per cent share and acting as the operator of the exploration and production-sharing agreement. The plans were delayed by conflict and then the coronavirus pandemic.
“They have very promising blocs in Libya,” Mr Sanalla said. “Eni will be an operator on behalf of BP. Covid has delayed things, but the agreement is valid and still there and I hope it goes into effect as soon as possible.”
The Tripoli offensive, which ended with a ceasefire last June, and the blockade put further strain on Libya’s already dilapidated oil infrastructure, slowing down recovery and placing limits on its maximum production.
“Production is always in danger,” he said. “We reach 1.3 million barrels a day, and then sometimes we return to 1.2 million and 1.25 million barrels a day, because we are always doing maintenance repairs. The ceiling is a big problem for us. We reached 1.303 million two weeks ago, then we come back to 1.25 million.”
Mr Sanalla said that the government in Tripoli had provided scant resources to upgrade old infrastructure, so the NOC was turning to its international partners for help. It is holding meetings with Total, the French company that has interests in several Libyan concessions. “Total want to invest,” he said. “They look at the Libyan market as a promising market.”
Since the blockade was lifted in September, revenues remain frozen in an NOC account in accordance with a US and UN-brokered agreement. During the blockade, Marshal Haftar had insisted that revenues be distributed more equitably with his eastern region, but the funds are likely to remain frozen until a temporary “unity” government is appointed in February.
Mr Sanalla has found support from the international community, including Britain, for his role in preserving the NOC’s independence in the war. Claudia Gazzini, a Libya expert at International Crisis Group, a think tank, said: “Foreign stakeholders consider Sanalla as a neutral technocrat who hasn’t aligned himself with Libya’s political and military factions and therefore support the positions and policies he takes.”