Libya’s $1B fuel debt threatens supply
Libya has built up approximately $1 billion in unpaid debts to its fuel suppliers following the termination of a controversial oil barter program three months ago.
Dues owed by state-owned National Oil Corp. are likely to triple by the end of the year if it doesn’t start clearing them, said two people with knowledge of the situation, asking not to be identified because the information is private, News.Az reports citing foreign media.
The company’s inability to pay risks the availability of products such as gasoline in a country beset by political unrest.
Despite sitting on Africa’s largest oil reserves, Libya is heavily dependent on imports of refined fuels due to a shortage of refining capacity. A swap system had enabled it to pay for the purchases with crude in an arrangement that allowed the NOC to avoid immediate cash payments. But Libya’s audit bureau earlier this year called for the termination of the system, citing inefficiencies.
Libya’s oil ministry didn’t immediately respond to a request for comment.
The nation heavily subsides fuel, with both gasoline and diesel costing $0.027 a liter — among the cheapest in the world, according to the Global Petrol Prices online tracker. That’s less expensive than a bottle of water in the country. A UN panel said in December that some of the cheap imported fuel is smuggled abroad to be sold at higher prices.
The NOC has been unable to pay for fuel imports with its earnings from crude sales because that revenue needs to be deposited directly in the country’s central bank, the people familiar with the situation said. The country is ruled by two separate governments, with both sides vying for control over the oil sector and the central bank.
The situation is emblematic of the deep fragmentation in Libya since the 2011 overthrow of longtime ruler Moammar Qaddafi. Severe fuel shortages resulted in miles-long lines at filling stations last year and the suspension of the head of the state fuel-distribution company as discontent rose across the country.
The NOC has urged the government to allocate the necessary funds to pay for fuel imports, warning that any failure to do so will result in disruptions to critical services such as power stations and transportation, according to a Jan. 19 letter signed by the chairman of the NOC that was seen by Bloomberg.
In the correspondence, the company called for the implementation of a new payment mechanism to ensure the timely release of fuel budgets, through letters of credit from the central bank.
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