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Sanalla makes pitch for investment as US backs oil cash flow freeze

© Supplied by Libya's NOCMen sit at tables listening during a conference
Libya is working on changes to its contractual regime as it makes a bid to play a role in Europe's energy security considerations. Picture shows; NOC chairman Mustafa Sanalla attending the Verso Sud conference. Italy. Supplied by Libya's NOC Date; 13/05/2022

The head of Libya’s National Oil Corp. (NOC) has highlighted the North African country’s role in meeting Europe’s energy security needs and downplayed the risks.

“Many observers” see Libya as a “high risk territory” for oil investors but this is not accurate, chairman Mustafa Sanalla told attendees at the Verso Sud forum in Sorrento, Italy.

NOC is working to incentivise company investment through changing contract terms, Sanalla said. The government and NOC have taken “the first step to set in motion” such changes.

They are “working collectively to determine the best contractual terms that are fair to our future partners companies, and which will recognise and appreciate the value of the resources that positioned under our soil and the value that the concession holders will bring to develop, produce and steady progress in boosting those resources”.

The plan, he said, is to set out the contract change ambitions by the end of the year.

Company plans

In the meantime, though, companies are returning to Libyan operations, he said.

The official noted the return of a number of companies, including Eni, TotalEnergies, ConocoPhillips and Equinor, in the last two years. They have invested more than $1 billion per year, he said.

More companies are working on a return, including BP, Sonatrach and PGNiG.

He highlighted a Total, Conoco and Hess plan for the North Gialo 6J and NC 98 plan. This onshore oil project has an estimated budget of $3.5 billion. NOC is reviewing these plans, he said.

Total set out its support for the 100,000 barrel per day North Gialo project in November 2021. The company said this would involve a $2 billion investment.

“We have other gas development ready projects, such as NC 7 and NC 210/Atshan, in the Ghadames Basin,” Sanalla said. This will require an investment of more than $4bn and will provide gas to the local and international markets within three to five years.

Since the invasion of Ukraine, Europe has taken steps to reduce its reliance on Russian gas. As a first step, the focus is on existing North African exporters: Egypt, Algeria – and Libya.

Sanalla said Libya was “the right place to invest in natural gas due to the current crisis in Europe”.

Political pressure

While Sanalla highlighted Libya’s advantages, the US embassy in Tripoli put out a statement supporting the freeze on transfer of oil revenues to the Libyan Foreign Bank.

US Ambassador Richard Norland told Al-Wasat that, as a result of “tremendous pressure”, Sanalla had been pressured to transfer $8bn to the Central Bank of Libya (CBL).

The Tripoli-based government – led by Prime Minister Abdul Hamid Dbeibeh – has access to funds in the CBL. The eastern House of Representatives (HoR) announced a new prime minister, Fathi Bashagha, in February, challenging Dbeibeh.

Amid the dispute over legitimacy, local groups have closed a number of Libyan fields and terminals.

The US embassy said “transparent management” was necessary to restore Libyan oil production. The US is ready to support such efforts, it said, with the longer-term goal of holding parliamentary and presidential elections.

Bashagha wrote an op-ed recently in The Times, calling for foreign mercenaries to leave Libya. In particular, he highlighted the presence of Russia’s Wagner Group.

Bashagha then denied he had written the piece, on May 4, saying the newspaper should avoid publishing “false articles”.

The Times disputed his statement. “We stand by our publishing of this article and Fathi Bashagha’s staff have confirmed to us it is accurate,” the newspaper said.

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