Glencore seals Libyan oil deal to cover mining losses

LONDON: Trading house Glencore has secured a deal to buy as much as half of the oil Libya is exporting as it looks to boost trading to help offset flagging profits from mining.

For war-torn, cash-strapped Libya it offers steady sales to international buyers and shifts to Glencore the risks associated with loading oil and chartering vessels at ports where operations have become more unpredictable due to the conflict in the country.

Under the arrangement with Libya’s state-run National Oil Corp (NOC), which began in September, Glencore loads and finds buyers for all the Sarir and Messla crude oil exported from the Marsa el-Hariga port near the country’s eastern border with Egypt.

While Libyan oil exports peaked at 1.6 million barrels per day (bpd), battles between rival factions seeking to control the country, as well as strikes and blockades by local tribes, have kept production under 0.5 million bpd for most of the past year.

Hariga, with exports of up to 140 000 bpd, has become Libya’s largest exporting terminal, as the two biggest – Es Sider and Ras Lanuf – remain closed.

Libya is still exporting oil from other locations, such as offshore platforms Bouri and Al-Jurf, without a Glencore gobetween, and is working to reopen its larger fields of El Feel and Sharara.

A slump in copper – usually a major profit centre for Glencore – zinc and coal prices has badly hurt the company, which has one of the highest debt levels in the industry. Its shares have shed more than two-thirds of their value this year.

It has promised to cut debts by selling assets and suspending dividends, and has also assured investors its large trading division would help it withstand the commodities price slump and weak revenues from mining.

Glencore hopes to generate $ 2.5-$ 2.7 billion ( R34.8bn to R37.6bn) in trading revenues this year, although first-half revenues came in below expectations.

The Tripoli- based NOC and central bank are some of the only institutions still functioning in Libya.

The NOC earlier this year denied reports of an exchange of crude for oil products with Glencore, and said any arrangement that did not route payments via its central bank would be illegal. – Reuters