January 30, 2018 / 1:59 PM / a year ago

Libyan oil output hindered by budget cuts, NOC head says

LONDON, Jan 30 (Reuters) - OPEC member Libya’s ability to rebuild its oil output will be hindered by ongoing constraints on National Oil Corporation’s (NOC) budget, the state-owned group’s head said.

NOC received only 50 percent of its capital expenditure budget from the Libyan government in 2017, Mustafa Sanalla told a Chatham House conference in London on Tuesday.

“In terms of investment, we assume that this year, as in 2016 and 2017, political actors will attempt to use control of the state budget process to control NOC,” Sanalla said.

Crimping the budget of NOC, which employs more than 60,000 people and helps pay the salaries of most workers in Libya, is nonsensical because investments could help restore its pre-civil war oil capacity of around 1.6 million barrels-per-day.

Under Libyan law, NOC hands over oil revenues to the Central Bank and is then allocated its budget by the Libyan government.

Any further investments and any such attempts will be closely watched by the Organization of the Petroleum Exporting Countries. Libya told OPEC in November there was still a lot of uncertainty around its production levels but that its 2018 output is likely to remain around 1 million bpd.

“If NOC is lost, Libya will take a long time to be put back together,” Sanalla told the conference.

While NOC has to a large extent succeeded in raising production levels in recent months by negotiating with various groups to end port and pipeline blockades and raise oil output, security threats to infrastructure remain.

Sanalla said he was hopeful that further blockades in the east of the country would be avoided, expressing faith in the Libyan National Army (LNA) which ended a blockade by the forces of Ibrahim Jathran on key export ports in September 2016.

“I don’t believe the LNA and its leadership will now allow the tactics of Jathran to be used under their supervision, especially because of their devastating economic effect.”

The LNA is dominant military force in eastern Libya, led by military commander Khalifa Haftar. (Additional reporting by Aidan Lewis in Tunis; editing by Alexander Smith)

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