Page 5 - AfrOil Week 32

AfrOil COMMENTARY AfrOil

If they opt for either variant of the latter course, conducting discussions on the resumption of oil
they will quickly run into difficulties. If they production. It also managed to bring some of its
maintain upstream production and try to put assets back online, lifting force majeure at two of
extra volumes into storage, they will have to con- its largest oilfields, Sharara and El Feel.
front the fact that depots have limited capacity, But within just a few days NOC declared
and when they fill up – as tank farms around the force majeure again. It said it had done so
world have done this year, as a consequence of because armed men from the Petroleum Facil-
the coronavirus (COVID-19) pandemic – there ities Guard (PFG), a faction allied with LNA,
is no place to put the extra volumes. (They will stormed the two fields and reinstated the block- “
also have to consider the risk of using facilities ade. Since then, the company has noted armed Greece has now
that are, as Sanalla noted, less secure because of clashes between PFG troops and other militias
the unrest in Libya.) allied with LNA. It has also reported the pres- signed its own
Likewise, if they send the extra volumes to ence of outside forces – mercenaries from Syria maritime accord
domestic refineries, they will have to confront and Sudan, as well as Russia’s private Wagner
the fact that these plants have limitations of group – at Libyan oilfields and export terminals. with Egypt, laying
their own. Oil-processing plants cannot accept
unlimited quantities of feedstock, and even if Diplomatic and military conflict claim to some of
they do raise throughput and turn out more These tensions are not likely to abate soon.
petroleum products, they cannot sell more than Indeed, they may get worse, given that Libya the areas covered
the local market is able to absorb. As such, they appears to be headed towards a diplomatic clash by the deal
too will have to find a way to put their extra vol- with neighbouring Egypt – and perhaps with the
umes into storage. (They may also have to take European Union as well. between Libya
steps to prevent the extra fuel from falling into The GNA relies heavily on Turkey, which has
the hands of smugglers, which NOC described been supportive of its interests. To this end, it has and Turkey
as an additional source of instability for the supported Ankara’s territorial claims in the east-
country in a statement dated August 6.) ern Mediterranean. Last December, for example,
This leaves curtailing production, an option it signed a maritime accord designed to establish
that has its own risks. It often involves shutting the boundaries of Turkish and Libyan exclusive
down development wells at oil and gas deposits economic zones (EEZs) in the sea.
– and then, further down the road, dealing with The agreement has drawn heavy criticism
the fact that these wells may not yield as much as from Greece, which says Turkey’s claimed
they did prior to closure. boundary comes too close to Crete and infringes
upon the Greek continental shelf. It is also under
Production shutdowns fire in Cyprus, which has expressed similar con-
NOC is already in a difficult position on this cerns, and the EU is paying close attention, as
front, given that many of its wells have had to both Greece and Cyprus are member states.
be taken offline since January, when LNA forces The stakes in this dispute have gone higher
began mounting a blockade that forced the over the last week, as Greece has now signed its
shutdown of many oil and gas fields, as well as own maritime accord with Egypt, laying claim
pipelines and other midstream infrastructure to some of the same areas covered by the deal
serving the coastal terminals. The blockade struck between Turkey and Libya last Decem-
caused Libyan oil production to drop from more ber. The stage appears to be set, then, for more
than 900,000 barrels per day in mid-January to diplomatic wrangling, as the EU appears to be
less than 100,000 bpd just a few months later. in favour of the Greek-Egyptian deal. There may
Conditions did appear to be improving in also be more armed conflict in the near future, as
early June, as peace talks brokered by the EU Egypt’s government has laid the foundation for
earlier in the year gained momentum and GNA military intervention on LNA’s behalf.
troops took territory back from LNA and its If Cairo does take that step, Libya’s oil termi-
allies. At that time, NOC, which is nominally nals are likely to see more fighting. If so, Sanalla’s
independent of the rival factions, said it was warning of disaster may prove prescient. ™

(Image: Turkish Foreign Ministry)

Week 32 12•August•2020 www. NEWSBASE .com P5