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Libya's oil exports face setback as blockade resumes, NOC singles out UAE

Highlights

UAE wants Libya to resume oil output

LNA demands new mechanism for oil revenue

NOC says foreign powers are meddling in oil sector

London — Libya's National Oil Corp. declared force majeure on all crude exports on July 12, a day after the Libyan National Army re-instated an oil blockade as the civil war continues to hold the country's oil sector hostage.

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Libya's oil was poised for a gradual restart and then was set back on July 11 when the Libyan National Army vowed to continue its oil blockade in the war-torn North African country unless its demands on the redistribution of oil revenue were met.

The UN-backed Government of National Accord is supported by Turkey and Qatar, while the LNA, led by General Khalifa Haftar, is backed by Russia, Egypt, the UAE and Saudi Arabia.

NOC singled out UAE for the reasons behind the LNA reversal, saying the fellow OPEC member was not cooperating despite reassurances.

"This is gravely disappointing, especially following repeated statements by very senior representatives of the UAE last week in support of international efforts to restart oil production in Libya," NOC chairman Mustafa Sanalla said.

The UAE's Anwar Gargash, minister of state for foreign affairs, said in a tweet on July 13 that the UAE wants oil production to resume but revenue should not contribute to the conflict.

"The UAE, alongside its partners, wants to see a return to oil production in Libya as soon as possible, with safeguards in place to prevent the proceeds fueling further conflict," Gargash said. "We continue to work for an immediate ceasefire and return to a political process."

Libya's state-owned NOC said on July 13 it had no choice but to declare force majeure on crude loadings to "limit its contractual liabilities."

Crude production in Libya, which holds Africa's largest crude reserves, has been slashed to around 70,000 b/d-100,000 b/d in the past few months from over 1.1 million b/d before the blockade.

Foreign meddling

Sanalla recently said foreign powers were meddling in the country's oil sector and were preventing the North African producer from restarting production.

"Wagner [Russian] and Syrian mercenaries now occupy Es Sider oil port and Wagner and Sudanese mercenaries are camped within the vicinity of the Sharara oil field, preventing Libyan oil from flowing," Sanalla said.

The LNA had listed three conditions to lift the blockade: opening a special bank account for oil revenue in an unnamed country outside Libya for equitable distribution; preventing oil revenue from funding "terrorism and mercenaries," and reviewing central bank oil revenue accounts over their spending in past years.

On Jan. 18, eastern tribes, supported by the LNA, halted exports from five key oil terminals, which dramatically reduced the country's crude production, with most of the crude that was exported being loaded directly from Mediterranean offshore fields.

This blockade cost the country more than $6.5 billion in revenue from lost production since the initial blockade began.

Sanalla had also warned of permanent damage to the country's oil sector from both a budgetary and technical perspective, which will have severe repercussions on its future output capacity.

Libya's main light sweet Sharara and Es Sider export crudes yield a large proportion of middle distillates and gasoline, making it popular with refineries in the Mediterranean region and Northwest Europe.

(Updates with UAE comment.)