Libya oil production under threat amid row over central bank governor

Government in east of divided country says it will end production after rival administration removes bank chief

Libya's two rival governments are embroiled in a power struggle for oil revenue. Reuters

Authorities in eastern Libya have said they will shut down all oil production and exports as rival factions controlling the divided country engage in a power struggle for control of the central bank and oil revenue.

The move by the prime minister for the eastern region, Osama Hammad, follows a decision by a rival administration in the west to remove central bank governor Sadiq Al Kabir, whose role was to distribute the country's oil revenue between the two governments.

“The Libyan government declares a state of force majeure on all oilfields, vessels, institutions and facilities, and suspends the production and export of oil until further notice,” the eastern government based in Benghazi said.

Libya's National Oil Corporation (NOC), which controls the country's oilfields, did not react to the announcement on Monday but a subsidiary, Waha Oil, said it would reduce oil production gradually, citing "pressures".

The internationally recognised government in the west, based in Tripoli and run by Prime Minister Abdul Hamid Dbeibah, also did not respond.

Libyan analyst Othman Bensassi told The National that authorities in the east "do not have the legal right to execute such a move but control security for oilfields in the south-east of the country".

Both governments get their budgets from Libya's oil and gas reserves. Mr Al Kabir, who had served as central bank governor since 2011, was removed by decree by the Tripoli government amid protests over his allocation of the funds. He was replaced by the Central Bank of Libya's deputy governor Mohamed Abdul Salam Al Shukri.

"The central bank governor has the main role in charge of all transactions, and is the guarantor of imports, exports and money transfers," analyst Mr Bensassi told The National, saying Mr Al Kabir was a loyalist to the country's eastern forces.

Earlier this month, the National Oil Corporation closed the Sharara oilfield in the country's south-west after protests erupted calling for the removal of the central bank governor.

Libya's oil production before the closure stood at about 1.2 million barrels per day.

The power struggle in Libya emerged after a 2011 Nato-backed uprising toppled dictator Muammar Qaddafi, splitting the country into two rival administrations three years later.

The western part is governed by the Government of National Unity, which was established through a UN-led political process ahead of elections scheduled for December 2021.

In the eastern region, a rival government called the Government of National Stability emerged in March 2022, taking control of about three quarters of the country's oil production capacity.

Oil prices surged in evening trade on Monday on fears over the halt in Libya's production.

Brent, the benchmark for two thirds of the world's oil, was trading 2.7 per cent higher at $81.15 a barrel at 4.34pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 2.9 per cent at $77 a barrel.