Thu, May 18, 2017 - Page 6 News List

German oil firm denies owing Libya any money

POWER STRUGGLE:Libya’s National Oil Corp boss claims Wintershall colluded with unlawful efforts by the Libyan government to take over sale of oil contracts

The Guardian

A German oil producer has been accused by the head of Libya’s National Oil Corp (NOC) of withholding more than US$900 million from the Libyan state and colluding with unlawful efforts by Libya’s UN-backed government to take over the sale of the nation’s vastly profitable oil contracts.

The power struggle between the NOC and Wintershall — which denied that it owed any money and said it had always met its obligations to the state — has long-term implications for global oil prices and the Libyan economy, since more than 80 percent of Libyan state revenues derive from oil.

Despite Libya’s political crisis, oil production has been gradually increasing, reaching 800,000 barrels per day.

The NOC is seen as one of the few bipartisan Libyan institutions capable of keeping out of the political infighting that has dogged the nation since Libyan leader Muammar Qaddafi fell in 2011. Libya was producing 1.6 million barrels per day before the uprising, and the NOC has said output this year could reach between 1.1 million and 1.2 million barrels per day if political obstacles are removed.

The NOC said that the battle with Wintershall, and the support the company has enjoyed from the UN-backed government, was vital to its ability to keep control of decisions on oil contracts away from politicians and ensure that the maximum amount of revenue reaches the state coffers.

NOC boss Mustafa Sanalla claimed that Wintershall knew before him of a controversial move by the presidency council — the name of the UN-backed government led by Libyan Prime Minister Fayez Serraj — to take over control of decisions on the terms of oil contracts and investments from the NOC.

The legal status of the presidency council’s move, which occurred in March and is known as Resolution 270, is now unclear after an appeal court in Benghazi on Monday ruled that the council had over-reached itself.

Based in Kassel and part of the chemical BASF Group, Wintershall is the oldest established oil company in Libya and is regarded as being better positioned than other foreign oil firms to increase oil production in Libya.

Sanalla said Wintershall had “tried to interfere with the Libyan internal politics and to take advantage of the fact that the state is so weak.”

He also alleged that staff nominally advising the council had previously been employed by Wintershall for years and that the council was making political decisions, such as Resolution 270, that “were written by Wintershall and designed to help Wintershall.”

In 1966, Wintershall was granted two concessions in the East Sirte basin, 1,000km south of Tripoli. By 1996, the concessions were capable of producing 100,000 barrels per day.

Sanalla said a memorandum of understanding was signed in August 2010 extending these two concessions, on the condition the terms of the concessions were made more favorable to the government, bringing them into line with the type of contract agreed by other foreign oil operators in Libya.

He said Wintershall had not honored this agreement.

The differences between the two contract terms amounts to US$900 million, NOC said, based on a calculation of the amount of barrels produced, at an average price, plus contract bonuses.

The dispute has led Wintershall to slash production by more than 100,000 barrels a day.

Sanalla also claimed that the council passed Resolution 270 partly to allow Wintershall to evade its obligations under the 2010 agreements.

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