<article><p class="lead">The stability of Libya's crude production is once again under threat as key political actors across the country's east-west divide tussle for control over the country's oil revenues.</p><p>The eastern-based Government of National Stability (GNS) — which is supported by Libyan legislature the House of Representatives — has threatened to stop the flow of oil and gas, including exports, unless it is allowed to appoint an official with oversight of state-owned oil firm NOC's finances.</p><p>Around three quarters of Libya's 1.2mn b/d of crude production is located in the east, alongside five of the country's nine oil export terminals. Exports have been running relatively smoothly at around 1mn b/d since July 2022 when the last oil blockade — orchestrated by eastern-based Khalifa Haftar, head of the Libyan National Army — was lifted. </p><p>Russian mercenary group Wagner has supported Haftar militarily since 2018, with a presence around key oil infrastructure in the east of Libya. The group has an estimated 1,000 members in the country right now. To what extent Wagner's aborted mutiny in Russia on 24 June will affect the group's foreign operations is uncertain.</p><p>NOC officially answers to the internationally recognised Tripoli-based Government of National Unity (GNU), with oil and gas export revenues flowing into the Tripoli branch of the Central Bank of Libya. Spending is then co-ordinated between the GNU, led by Abdelhamid Dbeibeh, and central bank governor Sadiq al-Kabir.</p><p>The GNS' threat of yet another oil blockade surfaced on 24 June, two days after a court in the eastern city of Benghazi ordered a freeze on NOC accounts. Eastern factions accuse authorities in Tripoli of corruption and abuse of oil revenues. The court order was followed by a visit to GNS prime minister Osama Hamad by NOC's chairman Farhat ben Gudara in an attempt to reach a resolution. But the visit appears to have exacerbated disagreements over which of Libya's rival administrations NOC answers to. The GNS subsequently reiterated its threat to shut production.</p><p>Whether a new blockade is instituted or not will largely depend on central bank chief Kabir, according to Jalel Harchaoui, Libya specialist at the UK's Royal United Services Institute. "Haftar wants Kabir to grant NOC a budget worth around $5bn, which he would then be able to access through his control over several NOC subsidiaries in the east," Harchaoui told <i>Argus</i>.</p><p>The episode is the latest salvo by eastern-based powerbrokers to gain more access to Libya's oil revenues. The central bank in Tripoli put Libya's oil and gas revenues at $27bn last year. NOC reported revenues of $1.66bn for May.</p><p>The GNU's oil minister Mohamed Oun told <i>Argus</i> today that he is very concerned by the threat of another oil blockade, which he said would affect ordinary Libyans the most. "If oil production stops, then associated gas production also stops. This will affect our ability to supply power stations," Oun said.</p><p>While Libya's power generation capacity has improved over the past year, the country frequently faces blackouts during the winter and summer months when demand peaks. </p><h2>Lost alternative</h2><p>Any renewed disruption to Libyan exports would deprive European refiners of an alternative to Russian medium sour Urals crude. Libya's medium sweet grade Es Sider — the country's largest crude export stream — has emerged as a key replacement for Urals since the EU's ban on Russian seaborne crude imports came into force in December last year. European customers accounted for 796,000 b/d of Libya's total 999,000 b/d of crude exports in the first five months of this year, according to <i>Argus</i> tracking data. With around 450,000 b/d of medium sour Iraqi Kirkuk exports still offline, the loss of Libyan flows would tighten the market at a time of seasonally higher demand. </p><p>Libya has suffered from several politically motivated oil shutdowns since 2011 — the year in which a bloody uprising toppled long-time leader Muammar Gaddafi and set the country on course for more than a decade of political chaos. Haftar instigated the last shutdown between April and July 2022 in an apparent bid to replace Dbeibeh's administration with a new government chosen by the House of Representatives. At its height, that blockade knocked out around three quarters of Libyan crude production. Eventually the rival sides reached a tacit deal which led to then-NOC chairman Mustafa Sanalla being replaced and the western camp agreeing to channel more money into the east. </p><p class="bylines">By Aydin Calik and Kuganiga Kuganeswaran</p></article>
