Photographer: Andrew Caballero-Reynolds/Bloomberg

Vitol Joins Glencore Backing Libya's Tripoli Oil Company

  • Oil trading houses join Glencore in backing Tripoli-based NOC
  • Traders picking sides in east-west dispute over Libyan oil

Vitol Group and Litasco SA declared their support for Libya’s Tripoli-based National Oil Corp., bringing to three the number of commodity traders backing the state oil company in the west of the country over a competing entity in the east.

Tripoli-based NOC is the “sole legal supplier of fuels to all of Libya” and Vitol is close to concluding a contract for 2016 in the next few days, the world’s biggest independent oil trader said in a statement on its website. Litasco sees “no alternative” to the NOC “to be our counterpart” for all crude and product deals with Libya, the trading unit of Russia’s Lukoil PJSC said in an e-mailed statement.

Libya, with Africa’s largest oil reserves, is trying to ramp up crude production after closing fields and fracturing into two rival government administrations following the ouster of Muammar Qaddafi in 2011. One administration is based in the west while an internationally recognized government operates from the eastern city of Tobruk. The latter appointed its own officials to represent Libya in matters relating to petroleum and has threatened to stop oil and fuel tanker deliveries and exports.

The “NOC, based at its legal address in Tripoli, has served Libya well by staying independent,” Vitol Chief Executive Officer Ian Taylor said. “We are confident it will continue to do so.”

Glencore Deal

Glencore, the second-largest independent oil trader, said last week it supported the Tripoli-based NOC after confirming it had signed a deal with the state-run company in September to ship oil from the port of Marsa al-Hariga. Oil officials appointed by the government in eastern Libya threatened to stop the exports and sent a letter to Glencore seeking to confirm whether an accord had been signed with the Tripoli administration.

In the Vitol statement, Mustafa Sanalla, chairman of the NOC based in Tripoli, said Libya is “at a critical juncture” and peace could be built around state institutions like NOC, but will be harder to achieve if they fragment. “They must be kept intact,” he said.

“Throughout this year the government in the east has tried to make traders deal directly with it, including threatening consequences if they refuse,” Richard Mallinson, a London-based geopolitical analyst at Energy Aspects Ltd., said by e-mail. “The traders have resisted any alterations to contract or payment arrangements.”

Vitol, which trades about 5 million barrels of oil or petroleum products a day through a business stretching from Houston and London to Dubai and Singapore, said it will “100 percent” guarantee and secure the regular delivery of fuel to all of Libya. That will include the heavy oil needed to support local infrastructure including power stations, desalination plants and hospitals, Vitol said.

Libya’s crude production has slumped to less than 370,000 barrels a day and exports to 260,000 barrels a day, out of a production capacity of 1.6 million barrels, Sanalla said in an interview last week. The reduction in output has made the country into the smallest producer in the 12-member Organization of Petroleum Exporting Countries.

“Looking further out, Libya will only be able to ramp up production and exports once a political rapprochement between the two rival administrations has been achieved,” Eugene Lindell, an oil market analyst at JBC Energy GmbH in Vienna, said by e-mail.

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