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Crude exports threatened as control of Libya's eastern oil ports handed to rival company

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Crude exports threatened as control of Libya's eastern oil ports handed to rival company

Dubai — The future of Libya's crude oil exports has been plunged into evengreater uncertainty with a rift opening between the National Oil Corporationand the so-called Libyan National Army over which controls the key eastern oilexport terminals only recently recaptured from a renegade militia.

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* Libyan National Army hands over control to rival authority

* NOC had planned to restart Ras Lanuf, Es Sider shipments

* NOC claims sole authority over exports, warns buyers to stay away

The LNA handed control of the ports over to a parallel oil authority onMonday, opening a new set of risks for buyers of the country's crude, just asthey were hopeful of an improvement following the recapture of the Ras Lanufand Es Sider oil terminals.

The handover of the ports to the eastern NOC is a major shift in policyfrom the LNA.

Led by Khalifa Haftar, the LNA controls most of eastern Libya and backs aparallel government in Tobruk.

But he has supported the internationally recognized NOC based in Tripolifor the last two years. The uneasy accord between the LNA and NOC had been akey factor in allowing Libya to raise its crude oil production to stabilize ataround 1 million b/d. But that now seems to have fallen apart.

"NOC in Tripoli is ignoring the eastern forces which are securing the oilcrescent after they lost about 200 personnel due to attacks," a spokesman wasquoted saying in the Libya Observer.

The NOC said late Monday it dismissed the LNA's legal authority todetermine control of the ports. Nevertheless, the LNA announcement is a majorblow to the NOC which had hoped to quickly restart exports following therecapture of Ras Lanuf and Es Sider last week from the Petroleum FacilitiesGuards.

"The LNA has no legal authority to determine control of oil exports fromLibya, and any attempt to do so would transgress UN Security Councilresolutions, and domestic Libyan law and penal code," NOC said in a statementemailed to S&P Global Platts.

The PFG themselves had seized control of the two ports on June 14. In theprocess, two crude oil storage tanks were destroyed, and Libyan output fell bymore than 400,000 b/d from around 950,000 b/d in May.

Along with the Brega and Zueitina terminals, the ports serve the Sirtebasin, a collection of oil and gas fields in central and eastern Libya thataccount for around 650,000 b/d, roughly two-thirds of the country's totalproduction.

A spokesman for the LNA said tankers would not be allowed to dock at theeastern ports under its control without permission from the rival NOC based inBenghazi.

But sources in Libya said Tuesday one vessel, the MT Atlantic Explorer,continued to load Sarir and Mesla crude for Glencore at Marsa el Hariga.Another vessel, the MT Felicity is also scheduled to berth at Zueitina Tuesdayto load 400,000 barrels of Bu-Attifel crude and 600,000 barrels of Zuetinacrude for Shell.

Both sales were under the authority of NOC Tripoli, and it was stillunclear if the LNA or eastern NOC would attempt to cancel them.

NOC chairman Mustafa Sanalla condemned the LNA, saying it had missed anopportunity to act in the national interest. It was now "behaving like thecriminal Ibrahim Jadhran", the leader of the PFG.

NOC also warned companies against buying oil from its rivals, saying itwould pursue legal action against them. Previous attempts to bypass NOC andsell crude failed, with buyers unwilling to take the risk.

"Exports by parallel institutions are illegal and will fail as they havefailed in the past," said Sanalla.

"The UN Security Council resolutions are very clear; oil facilities,production, and exports must remain under the exclusive control of NOC and thesole oversight of the Government of National Accord," he added.

--Adal Mirza, adal.mirza@spglobal.com

--Staff, newsdesk@spglobal.com, newsdesk@spglobal.com

--Edited by Jeremy Lovell, newsdesk@spglobal.com