Eastern Libya Bans Glencore Tankers

The eastern Libyan government's half of state-owned oil company NOC may seek to physically prevent tankers of commodity company Glencore from loading oil purchased from the western half of the company.

The proposed deal is said to allow Glencore to load the western NOC’s oil from the eastern port of Tobruk, which is under the control of the government in Benghazi. With Libya's Ras Lanuf refinery shuttered, the oil has nowhere else to go – but the eastern government may not allow it to leave the country.

Western NOC spokesman Mohammad Elharari told media that it does have an oil deal with Glencore to sell the oil, but did not elaborate. Glencore did not comment. Media reports indicate that the company may have agreed to purchase as much as half of Libya's current output.

The democratically elected eastern half of Libya is recognized by the international community as the legitimate regime. Despite this support from abroad, the recent push by the eastern NOC to monopolize oil revenue drew a rebuke from the he United Nations Security Council, which recently expressed concern over the unity of key Libyan institutions.

"The international community, the international companies and also governments are supporting the NOC to be united and to be one body," said Mustafa Sanalla, long-time chairman of the NOC before the two-government split. "Nobody likes to see division in the Libya oil sector, otherwise this would mean we are dividing the country."

Earlier in the month, military forces associated with the eastern government closed the major export hub of Zueitina, declaring force majeur and banning any tanker not registered with the eastern NOC. At the time, Zueitina was under the control of the western NOC. The closure forced several fields to stop pumping, dropping Libyan oil production below 400,000 bpd. Before the fall of Ghaddafi in 2011, national output was in the range of 1.6 million bpd.

Glencore is primarily a mining company, with major investments in commodities like nickel and copper, its main sources of revenue. As manufacturing slows in large economies like China, metal prices have dropped precipitously. Glencore shares have fallen nearly 70 percent since the beginning of 2015.

The company has extensive experience with investments in politically volatile countries, and may be attempting to turn its fortunes with a high-risk bet on contested Libyan oil.

The company's oil desk in London is one of the largest independent trading operations, with three million barrels of trade per day and significant profits this past year. Its executives are said to be in talks with Iranian officials about upcoming exports next year.