22 January 2025: New NOC head Sulieman pledges to end barter system from March
This week we look at the changes at the top of the NOC including Bin Qadara's resignation and acting chairman Sulieman's plan to end the crude-for-fuel barter system, as well as protests in Misrata.
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NOC says it spent over 10 billion USD on crude barter system in 2024; New NOC head Sulieman pledges to end barter system from March
Incident: Last week, the National Oil Corporation (NOC) was forced to clarify that it had spent over 10 billion USD on the crude-for-fuel barter system last year.
On 14 January, the Central Bank of Libya (CBL) issued a press release about the first meeting of the Monetary Policy Committee. It said the committee discussed the economic and financial situation of the country, evaluated the efficiency of monetary policy and reviewed the development of the Libyan dinar exchange rate. It also stressed the need for a unified budget for 2025 as well as the necessity of depositing revenues periodically in the CBL.
The same day, the NOC said it had received a statement from the CBL regarding the decline in oil revenues in 2024 compared to 2023 (as highlighted in the CBL accounts for 2024 published the day before) and said it was clarifying some details about the decline in response. The NOC said the revenue collected dropped from 31.132 billion USD in 2023 to 26.1 billion USD in 2024, that the amount spent on ‘discounts’ – in other words on the crude-for-fuel barter system – had increased from 8.798 billion USD in 2023 to 10.233 billion USD in 2024, and that the amount transferred to the public treasury had dropped from 22.334 billion USD in 2023 to 15.887 billion USD in 2024.
The NOC justified these figures due to: the figures paid to the treasury for 2023 being inflated by a payment of 2.4 billion USD of oil revenues and taxes owed by Total from March 2018 to November 2019; average oil production falling by around 36 million barrels compared to 2023 due to blockades; and the average amount of Brent crude for 2024 decreasing compared to 2023 by around 1.86 USD per barrel.
Following the resignation of NOC chairman Farhat Bin Qadara on 16 January, acting NOC chairman Masoud Suleiman announced that the NOC will halt the barter system from March.
In a letter from Suleiman to the Government of National Unity (GNU) dated 19 January, he said that the NOC will halt the barter system from 1 March 2025 based on a request from the Audit Bureau. Suleiman stated that the NOC would stop the payment in kind mechanism to its partners, Waha Oil Company and Eni for gas supplies, and would cease crude oil trade with fuel in compliance with the Audit Bureau’s directive.
Sulieman called for the necessary budgets to be provided for fuel supply operations. He said that if the fuel budget account is not funded, the NOC will not be held responsible for the return of traffic congestion or any disruptions at power stations or other vital facilities due to the loss of funds caused by delayed or failed payments.
Suleiman also noted that there is still time to adopt a payment mechanism from the relevant authorities to be implemented starting from March. He explained that he received verbal approval from the Audit Bureau on 16 January to continue working with the oil exports compensation system to meet local market needs for the month of February only, until the CBL is ready to provide the fuel budgets.
On 20 January, the Attorney General instructed the NOC to stop carrying out crude-for-fuel barters. The same day, the Chairman of the Audit Bureau, Khaled Shakshak, discussed with the Governor of the CBL, Naji Issa, the Bureau’s observations on the performance of the banking sector. They discussed the extent of the flow of oil revenues into the CBL’s accounts to ensure meeting public spending needs and foreign exchange requests. They agreed to hold a subsequent meeting in the presence of the Chairman of the NOC in order to address the issue of expected revenues during the year 2025 and the appropriate mechanism to ensure their flow into the accounts of the CBL on their specified date.
Comment: The Audit Bureau had previously called for the cessation of the oil-for-fuel trade system for fuel supplies starting from 2025. However, the NOC pointed out in a letter to the Bureau in early January that it would be difficult to stop using the trade system at the beginning of the year, as the supplies for December had already been allocated according to this system. It also proposed continuing temporarily until the CBL could activate the payment mechanism through letters of credit. The NOC had previously confirmed that the monthly estimated value of the country’s fuel needs amounted to 750 million USD, which included the cost of supplying natural gas to power stations. It has stressed that the delay in the CBL and Ministry of Finance releasing budgets was the main reason for needing the barter system.
The CBL figures for 2024 showed there was a net foreign exchange deficit of 5.2 billion USD, with the CBL saying this was due to the reduced amount of oil revenues transferred to the CBL during the year. Instead of the oil revenues being transferred directly to the CBL, they are used to barter for fuel imports under an opaque system which leaves significant space for corruption and mismanagement. The barter system has been in place since 2021.
In addition, the amount of fuel that is imported continues to rise as Libya’s significant subsidies on fuel drive lucrative fuel-smuggling networks, increasing the demand for fuel as so much is smuggled out of the country – Libya has limited domestic refining capacity with Zawiyya refinery the largest processing 120,000bpd.
Significance: The NOC pledging to end the barter system represents a significant development that could lead to notable improvements in the Libyan economy, if successfully implemented. Sulieman’s move is likely to have been triggered by growing political and economic pressure on the NOC from the CBL, Audit Bureau and others over the foreign currency deficit being created by the system, as well as a desire to set the tone for his (albeit potentially temporary) leadership by getting rid of opaque systems and initiatives that allow for significant corruption and mismanagement.
However, implementing this pledge is likely to face challenges on many fronts. The most fundamental issues is likely to be financial. Removing the barter system will mean that the NOC will require hard currency in order to purchase imported fuel on a cash basis, rather than swapping for crude. As highlighted by Sulieman, accessing foreign currency from the CBL is a challenge, especially at a time when the deficit is growing and costs are spiralling. Although in theory ending the barter system will mean the NOC receives more dollars from oil sales, these will take time to come through.
In addition, oil prices have already dropped on the back of President Trump’s ‘drill baby drill’ agenda and the US’ withdrawal from the Paris Climate Agreement – as such, oil revenues are likely to be lower in the short term, despite high production levels in Libya. Furthermore, other financial and economic pressures such as the lack of a unified budget or spending mechanism, plus the NOC’s insistence that it needs more funding on order to increase production further, are likely to increase in the short term.
In order to manage this, it is likely that the volume of imported fuel will need to be reduced. In theory, Libya imports far more fuel than it needs. In reality however, much of that is smuggled out again meaning the domestic fuel supply remains sensitive to reductions in imports. As such, reduced import volumes and/or delays in deliveries due to payment issues are likely to result in fuel shortages and bottle necks, creating additional chaos and disruption to Libyan society and the economy. In theory, ending the barter system could create an impetus for ending fuel subsidies, as a way to tackle fuel smuggling and reduce the amount of fuel needed in Libya. However, this is a sensitive and controversial issue which remains unlikely to be seriously tackled until there is at least a unified government, and even then it is unlikely.
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Tensions emerge in Misrata over arrest of Othman al-Taher Essa, a 17 February movement leader
Incident: On 16 January, Othman al-Taher Issa, a leader of the Misrata 17 February Movement, was arrested by the Misrata Joint Force, which is led by Omar Abu Ghadada. On 16 January in the evening, several hundred protesters blocked the road in front of the People’s Hall on Tripoli Street, a main road in Misrata, with burning tires and demanded the immediate release of Othman al-Taher Issa and other activists. Several of the Sheikhs and Notables of Misrata demanded the intervention of the Misrata Municipal Council, holding PM Abdul Hameed Dabaiba fully responsible for the security tensions in the city.
Bin Qadara resigns as NOC chairman claiming ill health; his deputy Suleiman temporarily replaces him until GNU decides on new appointment
Incident: On 16 January, the Chairman of the National Oil Corporation (NOC), Farhat Bin Qadara, resigned citing ‘health issues’. GNU PM Dabaiba accepted Bin Qadara’s resignation and appointed his deputy, Massoud Sulaiman, as acting Chairman shortly afterwards. Two days later, Suleiman released his first public comments to the press after assuming office. He emphasised the progress recently made in maintenance and production capacity, as well as the country’s potential. He stressed that Libya has ‘nearly 1,000 oil wells shut down’, and therefore needs ‘funding to support national companies in exploration, field development, and maintenance’.
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Tensions emerge in Misrata over arrest of Othman Essa, a 17 February movement leader
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