Libya’s New Unity Government Reignites National Oil Sector

Image: Anadolu Agency

Since the overthrow of Muammar Gaddafi in 2011 – Libya’s national ruler for 42 years – the country has experienced over a decade of violent civil war, in which opposing factions from the East and the West have led to a state of persistent political and social upheaval. Despite holding the largest proven oil reserves in Africa – estimated at 48.3 billion barrels – and approximately 1.5 billion cubic feet of natural gas,  civil conflict has resulted in several facility shutdowns as well as damage of critical oil fields. However, with the swearing-in of a new Unity Government on March 15, 2021 – a pivotal moment in the country’s history – key opportunities for the growth of the domestic oil and gas sector have arisen, driven by enhanced political stability and strong governmental support.  

Libya’s oil and gas sector accounted for 69% of export earnings in 2019 and approximately 60% of its GDP.  To restore economic stability and ensure the effective monetization of its natural resources, the Unity Government is positioning oil and gas at the forefront of its administration, using sectoral revitalization as a driving force for socioeconomic growth. By restructuring the sector internally,  rebuilding regional ties and targeting increased output, Libya is on its way to re-establishing itself as a global competitor in the international oil and gas arena.  

Internal Reforms Lead the Way 

In a bid to improve its oil and gas sector, the new administration has enacted a series of reforms to streamline sectoral activities and enhance production. Notably, the government has re-established its Ministry of Oil and Gas and appointed Libya’s former OPEC representative, Mohamed Aoun, as the new minister, a position that had been vacant since 2012. The establishment of the Ministry allows for the realization of benefits that accompany the return of national sovereignty to the sector. Specifically, the Ministry paves the way for long-awaited regulatory reforms, in which streamlined, oil- and gas-specific legislation will invite increased foreign investment and collaboration.  

Additionally, the Unity Government has fostered enhanced cooperation between the National Bank and Libya’s National Oil Corporation (NOC). The NOC had been previously withholding funds from the National Bank due to political uncertainty and civil conflict, causing a lack of transparency regarding the allocation of critical energy funds. However, with the newly-reformed administration, the NOC has forged a new relationship with the Bank, backed by transparency and mutual trust.  

Reestablishing Regional Ties 

Libya’s civil conflict led to a number of countries withdrawing their presence in the North African nation, in the form of embassy closures, cooperation restrictions, imposed sanctions and trade limitations. However, under new leadership, , countries are re-opening discussions with Libya in an effort to resume bilateral relations, specifically with regards to trade and energy. Notably, H.E. Recep Tayyip Erdoğan, President of Turkey, invited Libya’s newly-appointed Prime Minister, H.E. Abdul Hamid Dbeibeh, to co-chair the first meeting of the Turkey-Libya High Level Strategic Cooperation Council in Turkey. Additionally, Italy’s new Prime Minister, Mario Dragh’s first official visit since taking office was to Libya, while  Greece’s Prime Minister, Kyriakos Mitsotakis, visited the country with the objective of establishing peace between the two nations. Accordingly, Libya is prioritizing regional diplomacy in a bid to increase trade and generate economic growth.  

Positioning Production at the Forefront  

According to data from Trading Economics, crude oil production in Libya averaged 1.3 million barrels per day (bpd) between 1973 and 2021, reaching a record high of 2.37 million bpd in October 1973 and a record low of 7,000 bpd in August 2011. With civil conflict causing irregularities in crude production, the newly-formed Unity Government has prioritized increasing output and strengthening the participation of International Oil Companies (IOC). Accordingly, Mustafa Sanalla, Chairman of the NOC, has announced a targeted daily production of 1.45 million bpd by the end of 2021, 1.6 million bpd within two years and 2.1 million bpd within four years. These output levels, however, will be largely dependent on budget allocation and improved security at oil infrastructure facilities.   

Additionally, the Unity Government is actively pursuing increased IOC  participation in the sector, in which meetings with several majors are likely to drive exploration and production within existing and frontier oil fields. Since being sworn in on March 15, H.E. Prime Minister Dbeibeh has met with Eni’s CEO Claudio Descalzi regarding the company’s activities in the country, areas of common interest and future collaboration in the fields of renewable energy, social projects, energy access and professional training. H.E. Prime Minister Dbeibeh will also meet with Total’s CEO, Patrick Pouyanné, regarding further involvement of the French oil giant in developing the country’s prolific oil reserves. With the NOC planning to start production at new oil fields in the basins of Sirte in central Libya and Ghadmis in the West, as well as restarting fields previously shut down by the Islamic State, IOC involvement will be critical to the country’s production targets.  

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