Politics of the Libyan Oil Industry: The Latest Brawl

Politics of the Libyan Oil Industry: The Latest Brawl

Since the revolution of 2011, the Libyan oil industry has been politicized and has faced various challenges. It has witnessed a chain of setbacks that started with armed militias controlling the oil ports and halting oil exports.  In addition to the armed struggle over the oil ports, the political interest of groups and individuals impacted the operation of the oil industry. 

Oil Management is a Joint Responsibilities

The Libyan legislature has been keen to establish two entities responsible for managing the oil and gas industry.  The Libyan Petroleum Law of the year 1955 laidthe joint responsibility on the Ministry of Oil and another entity that runs the day-to-day business of the sector.   The Ministry of Oil & Gas duties have always been limited to overseeing the oil & gas industry production.  In 2012, the Council of Ministers (the Cabinet) issued Decree number 32 for 2012. Article 2 of Decree no.32 named twenty-three duties of the Ministry of Oil & Gas. Most important is the approval of production plans and concession licenses.

Responsibilities of the NOC

As early as 1968, Libya sought to create a corporation that would manage oil production and marketing and operate as a commercial corporation free from government intervention and bureaucratic hurdles.  The Libyan Petroleum Corporation was founded in 1968 by a royal decree which granted it the right to negotiate and supervise the execution of oil concession agreements.   With the arrival of  Lieutenant Gaddafi to power, the General Libyan Petroleum Corporation was replaced with the National Oil Company (the NOC) in November 1970 by Law number 24 for the year1970 to replace the Libyan Petroleum Corporation.

It was not until 1979 when the NOC was restructured and granted broader responsibilities under Decree number 10 of 1979, which authorized the NOC to enter into joint ventures with multinational companies.  Today, the NOC is the sole entity responsible for oil & gas exploration and production. It conducts such operations through its affiliated or wholly-owned companies as well as joint ventures with international companies.

The First Brawl:   Presidential Council and the NOC

On March 25, 2017, the Presidential Council (named the “Council of Ministers” by the Libyan Political Agreement) issued Decree no. 270/2017.  The Decree dissolved the Ministry of Oil & Gas, an organ of the executive branch, and designated the former’s responsibilities and functions to both the Presidential Council and the National Oil Corporation (NOC).

The Second Brawl: Oil Ministry and the NOC

With the arrival of the newly selected government headed by Prime minister Abdel Hamid Dubaiba in February 2021, Mohamed Aoun was appointed as oil & gas minister.  Another struggle surfaced among Libyan government entities, and in this instance, the struggle was of a legal nature.

On August 14, Aoun sent a letter to the Prime Minister suggesting establishing a new board of directors of the NOC.  The reason for this proposal was Mr. Aoun’s assertion that MustafaSannallh, Chairman of the NOC, assumed the position of the Chairman of the Board of the NOC illegally.  Consequently, Aoun decided to remove the Chairman of the NOC, Mustafa Sannallah, and appoint a new chairman. 

The Oil Minister accused the head of the NOC of holding meetings with foreign ambassadors, which he considered to be beyond the NOC Chairman’s authority.  On August 29, Aoun took Decision no. 35 for the year 2021, subjecting Sannallah to administrative investigation for (1) not obtaining prior permission for traveling on business trips and (2) not allowing the new head of the NOC, replacement of Sannallh, to assume his duties. 

The Reaction by the NOC

The Chairman of the NOC, MustafaSannallah, had denounced the Presidential Council Decree no. 270/2017 dissolving the Ministry of Oil & Gas, describing it as illegal because the Presidential Council is a mere “executive” organ.  He also rejected an attempt by the Minister of Oil, Mohamed Aoun, to suspend him and dissolve the board.

As for the latest brawl round between the Oil Minister and the Chairman of the NOC, Mustafa Sannallah dismissed the Oil Minister’s decision to replace him as illegal since the Cabinet is the only entity empowered to take such a decision. 

The NOC on September 20 welcomed the decision by Prime Minister Abd AlhamidAldabaiba (No. 292/2021) to withdraw the decision of the Minister of Oil (No. 35/2021) to suspend the head of the NOC Chairman Mustafa Sanalla from his post. The NOC stated that it now considers all decisions, correspondence, and measures taken in this regard to have no legal effect.International newspapers described the nature of the latest brawl as “old personal enmity. “In conclusion, the current political vacuum in Libya and the absence of effective state institutions have created a sense of independence among Libyan governmental entities and agencies since 2014.  Until recently, Libya witnessed two governments simultaneously; at one time, there were three governments.  A sense of ignoring the role of law and regulations led some entities to assume the responsibilities of other entities. 

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