The Fracture of Libya's NOC?

The recent fighting between rebels in Eastern Libya and the government of Muammar al-Gaddafi has resulted in a fracturing of the National Oil Corporation (NOC). Though later posts will delve into greater detail of the history and structure of the NOC, its subsidiaries and the relationship to the Oil Ministry, this post will focus on recent events.

The disentigration of the Libyan Oil Ministry, marked by the flight of former oil ministry officials , has been accompanied by the splintering of the NOC, as the Arabian Gulf Oil Company (AGOCO) sided with the Eastern rebels near Benghazi.

In addition to NATO's military actions in support of the Eastern rebels, oil will also be a tool of both the rebels and the international community (particularly the US and EU) to bring about Gaddafi's ouster. In contrast to the internationally imposed sanctions on the NOC (in addition to 26 energy companies operating under the NOC), the rebel-controlled East recently saw its first exports since the beginning of the conflict. Aided by Qatar, the rebels have exported 1 million barrels of oil (valued at approximately $125 million dollars), to provide much-needed funds to the anti-Gaddafi forces.

The breakdown of the National Oil Company could increase the likelihood of protracted conflict. AGOCO has nearly 3 million barrels stored in the eastern Tubruq terminal, which links via pipeline to the Sarir oilfield, Libya's largest. If the rebels gained control of Sarir, the potential monetary support of their rebellion could grow exponentially and neutralize the assymetric military might of Gaddafi's regime. The United States has assured the rebels that oil exports will be possible as long as they circumvent the NOC and its subsidiaries.

Though eastern oil exports have not resumed and AGOCO operates at only half-capacity due to security concerns and damaged infrastructure, the consequences of its split will be interesting in the months to come. Gaddafi's regime doesn't seem to be going anytime soon- and certainly not in response to floundering NATO actions; however, one would be hard-pressed to imagine a future-Libya where Gaddaffi is "allowed" to remain in power in blatant disregard to the will of the international community. Countries such as France, Italy and Qatar have already recognized the rebel's Libyan National Council (LNC) as the legitimate government; what will this mean for the possible evolution from the Gaddafi-era NOC to that of the LNC? What will this mean for the structure of NOC subsidiaries? The jointly-owned Waha Oil Company currently holds the top-spot- will it be replaced by a LNC-friendly AGOCO? How will a LNC-NOC engage with a Oil Ministry of Gaddaffi loyalists- or will this entail a total restructing?

Stay tuned for future updates and analysis. Next week's post will look into the historical and current structure of the NOC, its partnerships, and functions (awarding concessions, etc.).