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Benghazi-based oil services company Arkenu Oil Company – set up only in 2023 and whose ownership is unknown – is said to have exported 5m barrels of crude from the Marsa Al-Hariga terminal in Tobruk over recent months, with more due to follow soon. Its five 1m bbl shipments, have continued while facilities across the rest of the country have been blockaded by militias controlled by Benghazi-based warlord General Khalifa Haftar. They are all believed to have gone to China.
According to a well-placed source in Libya, Arkenu exported two cargoes in May, although this was not reported at the time. It exported a further cargo in July, news of which was first reported in African Energy (AE 509). Two further cargoes were sent in August and it is expected to ship two more in the coming weeks.
African Energy has approached Arkenu for comment on the claims made in this article, but had not received a response by the time of publication.
The oil comes from the Sarir and Messla group of fields operated by Arabian Gulf Oil Company (Agoco), a subsidiary of National Oil Corporation (NOC). The oil would normally belong to NOC itself, but the state-owned company has yet to explain how and why it transferred ownership to a Libyan-owned outfit registered at the commercial registry in Tripoli, but based in Benghazi.
NOC has not responded to African Energy’s questions about these arrangements.
Arkenu appears to be run or advised by former senior NOC figures, including Abuqasim Al-Sheibani Shanqir, Mohammed Al-Imari and Jadallah Al-Awkali, who all served on the board of NOC until about two years ago. In January 2022, all three broke with the chairmanship of Mustafa Sanalla, in an early sign of the divisions which led to his dismissal six months later (AE 453, 465).
Arkenu’s chief executive is Mounir Al-Mslati. Its website identifies its chairman as Mounir Mouftah Abu Bakr and its general manager, who reports to the board of directors, as Tariq Al-Bakoush.
Consequences of mercenary compromises
It is not clear who owns Arkenu, but one source described it as a “mini NOC”. Its establishment coincides with a wider political and economic crisis in Libya. The system of mercenary compromises that developed after the fall of Colonel Muammar Al-Qadhafi’s regime in 2011, and which has delivered a kind of peace by buying off violent antagonists, is imploding.
This system was until recently presided over by the powerful figure of Central Bank of Libya (CBL) governor Sadiq Al-Kebir. However, disagreements between Kebir and Government of National Unity (GNU) Prime Minister Abdel Hamid Al-Dabaiba led to the central bank governor being dismissed in early August. He has since fled to Istanbul.
Despite being a controversial figure, who limited financial abuses during his 13-year tenure but also oversaw the system which made them possible, Kebir was independent of both sides of Libya’s political divide (AE 306). He also retained the support of the international community. African Energy approached Kebir for comment, but he had not received a response at the time of publication.
Few other candidates can match his profile and Dabaiba has been unable to secure support for a replacement CBL management, either externally or within Libya. One compromise candidate has been mooted, but it has not yet been possible to get all the relevant parties to agree. In the meantime, Libya’s finances are rudderless. The CBL is still dealing with domestic payments, but relations with international banks have been suspended, putting the country’s financial stability at immediate risk.
Qui bono?
Worsening the situation, General Haftar – whose son Saddam Haftar is subject to a European arrest warrant issued in Spain for alleged weapons smuggling – responded to Kebir’s dismissal by ordering militias under his command to blockade oil facilities across the country. Fields operated by Spain’s Repsol in south-west Libya were already blockaded, as the Haftars attempted to force Madrid to rescind its warrant.
The blockades had an immediate impact and, by early September, NOC was reporting a decline in oil and gas output of about 85%. The only facility apparently still working and able to regularly export cargoes of crude is the Marsa Al-Hariga terminal in Tobruk, from which Arkenu is sending its shipments.
The blockade is different from those which Haftar and others have imposed before. The extent and duration of previous blockades were limited by the fact that those imposing them also suffered financially from the suspension of oil revenues (AE 409). This time, a Benghazi-based entity is still able to make large sums, creating a possible incentive for Haftar to maintain his blockade at other ports.
The losses the Libyan state and NOC are currently suffering makes questions over why the corporation has surrendered title to large amounts of crude even more pertinent (AE 506). According to data from the CBL, Agoco produced an average of 101m bbl/yr from 2021-23. Arkenu’s five cargoes shipped from May to August therefore represent around 5% of the operating company’s annual production, or as much as 15% of its output over that four-month period.
Explanations which don’t add up
Sources have suggested two sometimes contradictory justifications for the Arkenu trades. A document leaked in early July referred to GNU approval in 2023 (685-2023) of an NOC board decision (288-2023) awarding Arkenu an unspecified production sharing agreement (PSA) in the Sarir and Messla fields. This did not specify the amount of the share, or refer to any conditions, process or precedent for its award – as would normally be the case. African Energy has not been able to verify the validity of this document.
A separate source consulted by African Energy said NOC had agreed a risk service agreement (RSA) with Arkenu, in return for developing around 150 of the more than 450 shut-in wells under Agoco’s control. This is a form of contract not previously used in Libya.
NOC has, however, produced no data to suggest Agoco’s output has increased during 2024, as might be expected if Arkenu was indeed bringing these wells back online. A very large increase would have been necessary to justify the scale of the transfers of crude made to Arkenu. If it were entitled to, say, 50% of any uplift achieved under a PSA or RSA, an increase of 30m bbl/yr, or approximately 82,000 b/d, would be necessary to cover what it has received. For any smaller share a greater uplift in output would have been needed.
NOC has often negotiated much lower production shares in the past. For instance, Canada’s Suncor at Haroug Oil Operations, Repsol and its partners in Akakus Oil Operations, and Austria’s OMV at Zueitina Oil Operations all have 12% shares in the fields they operate. However, some earlier concessions were more generous.
In all earlier production sharing deals, the international oil companies committed large amounts of capital and expertise. African Energy has seen no evidence that Arkenu has carried out work or risked its own capital to increase Agoco’s crude oil production.
Libya’s state finances have already been heavily depredated by corruption. In the oil sector this has included opaque crude-for-fuel barter deals and enormous losses resulting from fuel smuggling, which has increased despite the jailing of an official in 2023 (AE 471, 488). There is a lengthy list of other questionable deals and transactions dating back several years (AE 488).
Libya can no longer afford to buy off armed and disruptive antagonists with distributions of its oil wealth. If the global oil price drops below $70 next year, as some analysts are forecasting, it may not even be able to pay state salaries at current levels of budget spending. The failure to invest NOC’s emergency budgets in developing more efficient oil and gas production represents a longer-term threat. As global oil demand declines during the lengthy transition to net zero, some of Libya’s resources may become too difficult and too expensive to ever be exploited. The country’s future is in the balance. |
