July 2 (Bloomberg) -- Rebels who helped decimate Libyan oil production by blockading eastern ports said the nation’s largest and third-largest export facilities can ship crude again, in a gesture of support for the newly elected parliament.
Es Sider and Ras Lanuf, which have combined capacity of 560,000 barrels a day, will reopen today, according to Ali Al- Hasy, a spokesman for the rebels’ Executive Office for Barqa. Libya’s state-run National Oil Corp. hasn’t been informed of the move, said Mohamed Elharari, company spokesman. The two terminals would increase Libya’s crude-export capacity almost five-fold.
The loss of the Libya’s oil production boosted the price of Brent, a benchmark for half the world’s traded crude. Brent futures for August settlement fell as much as 0.7 percent to $111.54 a barrel today, the lowest intraday level in almost three weeks. The restart of operations at the two ports would probably send Brent down to $110 a barrel, Commerzbank AG said.
“The Petroleum Facilities Guards in Es Sider and Ras Lanuf have been instructed to allow the two ports to resume operations,” Al-Hasy said by phone from eastern Libya. “This is an initiative from the Executive Office for Barqa to welcome the newly elected parliament that includes well-known patriots, and to encourage them to fight corruption and protect the natural resources of the nation.”
The self-declared Executive Office for Barqa seeks self- rule for the eastern region of Libya known also as Cyrenaica. It occupied oil ports in the region at the end of July 2013, demanding an oil-revenue-sharing agreement to make up for the neglect the area experienced under Muammar Qaddafi’s 42-year rule.
Libya is now producing about 320,000 barrels a day, or about a fifth of its output before Qaddafi was overthrown in 2011, according to state-run National Oil Corp. “We will lift the state of force majeure in Es Sider and Ras Lanuf when we receive confirmation of this agreement from the government,” said Elharari. Force majeure is a legal step that protects a company from liability when it can’t fulfill a contract for reasons beyond its control.
The premium of the front-month Brent contract over the second month, a structure called backwardation that signals tight near-term supplies, narrowed to as little as 7 cents a barrel on the ICE Futures Europe exchange in London today, the least since April 15. Brent’s premium to U.S. benchmark West Texas Intermediate narrowed as much as 41 cents to $6.54 a barrel on ICE.
Government representatives including Justice Minister Salah al-Mirghani and a delegation of the Barqa federalists sealed the agreement yesterday in the eastern city of Tobruk, Al-Hasy said. “The facilities in Es Sider and Ras Lanuf are in very good shape, they are ready to operate.”
‘Ready to Operate’
Es Sider has 340,000 barrels in daily loading capacity and Ras Lanuf 220,000 barrels, according to the oil ministry. The nation has a total of nine oil export terminals, of which three -- Brega, Jurf and Bouri -- are operating with a combined daily loading capacity of 145,000 barrels.
While the other terminals -- Zawiya, Mellitah, Hariga and Zueitina -- are under government control, they are not exporting because of protests at the ports or connected oilfields unrelated to those of the Barqa federalists.
The government has agreed to pay “in the next few days” the salaries of Petroleum Facilities Guard who defected to the Barqa group during the blockade and to implement a preliminary agreement reached on April 6, Al-Hasy said. The rebels handed over the oil ports of Hariga and Zueitina after this accord in exchange for amnesty and salary payments for the guards, and an audit of the National Oil Corp.’s oil sales since the overthrow of Qaddafi.
The Barqa federalists in May threatened to re-occupy Hariga and Zueitina in protest over the appointment as prime minister of Ahmed Maiteg, whom they see as allied with the nation’s Islamists. His appointment was later withdrawn, and elections were held last week for a new parliament.
--With assistance from Saleh Sarrar in Dubai and Grant Smith in London.