Libya prepares more oil autonomy for its east

Plans to grant more autonomy to Libya's oil rich east were laid out this week at the nation's first oil and gas summit held in Rome after months of unease among international oil companies over the uncertainty.

A new system in place will devolve power to subsidiary firms previously controlled by the state's National Oil Corporation (NOC) Mohamed Elabdaly, chair of the Libya Oil and Gas Summit, told Reuters.

"Previously, subsidiaries did not have control over exploration, upgrading and training. All that will change," said Elabdaly in an interview given on the sidelines of the summit.

Libya's east was starved of cash during Muammar Gaddafi's 42-year rule, and calls for federal rule have been fuelled by long-standing complaints it has been deprived of its fair share of wealth.

"The aim is decentralisation... The budget will be divided between counties, based on a formula that takes both population and geographical area into account," Elbdaly said.

The east's Arabian Gulf Oil Company was first in Libya to restart production after the uprising and for a period marketed its own oil to international firms.

An Agoco official said on the sidelines of the summit the Benghazi-based company did not want to regain control over its oil sales, but wanted independent control of its budget and projects.

Fawzi M. Bu Argoub, who manages Agoco's geology department, said the company was satisfied with the degree of autonomy granted from the state-oil firm, and was in favour of remaining under the supervision of the state's NOC.

Addressing the audience, Argoub said the company should manage its own future because it alone fully understood its potential.

"Agoco needs to avoid centralisation," he said.

Oil executives are reluctant to comment on the changes in Libya's oil sector. Foreign companies' contracts are due to be subject to a detailed review by a committee.

Most want to see how arrangements are resolved.

"Decentralisation makes sense," said Oliver Miles, former British ambassador to Libya and director at a consultancy that specialises in business intelligence. "But how decentralisation will take place is complicated."


In the opening session, a spat broke out between easterners in the audience who accused the Tripoli-based National Transitional Council (NTC) of marginalising the fighters to whom the revolution was owed.

In the awkward moments that followed, another state speaker grabbed a microphone and attempted to smooth things over reassuring "we have no problems", a remark met with snorts across the audience in the conference room.

Among the factions that make up Libya's oil elite, feelings appeared more harmonious.

Agoco is producing around 331,000 barrels of oil per day, but the eastern subsidiary is still waiting for approval from Tripoli for its 2012 budget to start its exploration activities.

So far, it has been patient as new practices laid out by the state-oil company are put to test for the first time.

Along with other subsidiaries in Libya, Agoco has submitted plans for the year and it is the NOC's task to aggregate the budget and obtain approval from the government.

Once approval is granted, each company will have complete control over the execution of its plans, according to Elabdaly.

He said the government had approved the 2012 budget, the largest in Libya's history, and the oil sector was expecting to receive the full amount requested, around $6 billion. The figure excluded funds allocated for war reparation.

Under the new system, the NOC's task would be to audit the performance of the various subsidiaries, leaving full control over operations in their hands.

Early this month, a group of civic leaders in Benghazi said they would run their own affairs, defying the government in Tripoli which is already struggling to assert its authority after Muammar Gaddafi was ousted last year.

Elabdaly said the move aimed to draw the government's attention to Benghazi, where a sense of neglect had been growing since the government and other state bodies moved to Tripoli late last year.

"When they all moved, Benghazi died again," he said.

Clerics in both Benghazi and Tripoli have warned the autonomy plan could lead to the break up of Libya, and after the declaration of autonomy, crowds packed into squares in both cities to express their opposition to the idea.

(Source: Reuters)

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