Libya: Rebels eye major refiners for help after Gadhafi's departure

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 7 -- Libya’s Transitional National Council, comprised of forces opposed to the rule of Moammar Gadhafi, said it plans on contracts with international oil companies that have refining capabilities when the time comes to resume production.

"When we do, the price will be set following negotiations with those major oil companies that have refinery capabilities,” TNC said, adding, “It should be noted that in the short term, we will only export enough crude to meet our needs during these difficult times.”

TNC also noted that it is still mulling the future of Libya’s National Oil Co., which is now under international sanctions.

"NOC is currently subject to international sanctions,” TNC said, adding, “We are still exploring what will happen to NOC in the future. However, for now, no oil is being produced."

TNC, which said many IOCs are eager to return to the North African country, confirmed that it will continue to honor all finance and oil contracts signed by the Gaddafi regime.

The rebels’ statement contrasted sharply with reports that Libya’s government has begun negotiations with Russian and Chinese energy firms about assuming Eni SPA's projects in Libya after the Italian firm withdrew its staff.

"This withdrawal happened without warning, and the Libyan state has started negotiating with big Russian and Chinese oil companies to enter into a partnership in these investments," said a Libyan government official.

The official did not identify the firms with which the Libyan government was said to be negotiating.

Eni withdrew its staff earlier this year after violence broke out in Libya, and it has since established contacts with the rebel forces based in the eastern Libyan city of Benghazi.

Meanwhile, the Gadhafi regime is continuing to come under pressure from international sanctions as well as stepped up attacks by forces of the North Atlantic Treaty Organization under United Nations’ mandate.

NATO aircraft struck military refueling equipment to deny pro-Gadhafi forces access to fuel in the Brega area after concluding that it was being used to provide fuel for military vehicles and equipment engaging in attacks on civilians in the East of Libya.

"These precision strikes will limit the ability of pro-Gadhafi forces to threaten Libyan civilians and significantly degrade logistical support for Gadhafi's campaign in eastern Libya," said Lt. Gen. Charles Bouchard, commander of Operation Unified Protector (OUP).

NATO’s OUP is being conducted under UN Security Council Resolution 1973, which calls for an immediate end to all attacks against civilians and authorizes all necessary measures to protect civilians and civilian populated areas under threat of attack in Libya.

The NATO attack on Brega followed earlier reports that many oil tankers in Libya's state-owned fleet remain anchored and unable to trade as cash flow issues continue to impinge normal activities, according to industry observers.

Although Libya's state-owned shipping firm General National Maritime Transport Co. (GNMTC) is not the target of sanctions, the organization is thought to be under the control of Gadhafi's son Hannibal, named on a blacklist of individuals subject to travel bans and asset freezes.

Laura Hamilton, an associate at law firm Norton Rose, acknowledged that GNMTC is not on the list of designated individuals and entities but noted that Hannibal Gaddafi is on the list.

Hamilton said the asset freeze not only applies to assets owned by the entities and individuals listed but also to assets held or controlled by them, hence the need for careful due diligence.

GNTMC has 18 vessels in its international trading fleet, 8 of them operated by ship management firm V.Ships, which said the vessels are currently laid-up off Malta and Singapore.

"It's the whole political situation—you can't get any money in or any money out in terms of working with Tripoli," the spokesman said, adding, "If there is no money flow, you can't trade, you can't pay for the bunkers, you can't pay for the crews, you can't pay for the ships and the ship owner can't get paid by the charterer.”

He said, “If no one can get paid, you have to stop the ship," adding that the tankers managed by GNMTC were presumed to be "anchored somewhere else."

As part of the sanctions regime imposed on Gadhafi’s regime, the European Union last month added six Libyan ports to the list of frozen assets, including the key oil terminals of Brega, Ras Lanuf, and Zawiyah.

Hamilton said the sanctions initially focused on people rather than trade sectors but that the most recent amendments provide for a distinction between contracts related to oil, gas, and refined products and other contracts.

Apart from sanctions, however, the fighting itself is keeping ships from calling at ports under the control of Gadhafi’s forces, a point underscored by Philip Roche, a partner at Norton Rose: “There is a hot war going on too which will further discourage activity.”

Contact Eric Watkins at hippalus@yahoo.com.



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