Mustapha Dalaa, Halime Afra Aksoy

This agreement is expected to encourage international energy companies to invest in Libya again.

The 8 billion Euro agreement signed between Libya and Italy, covering the cooperation in the field of natural gas in the Mediterranean, not only increases the export capacity of Tripoli, but may also enable the Government of National Unity (UBH) to achieve various political goals, even if it pays some costs.

The agreement signed between the Libyan National Petroleum Corporation (NOC) and Italy’s gas company Eni in the capital Tripoli on January 28 covers the development of fields with a total gas reserve of 6 trillion cubic meters. With the agreement, it is aimed to increase the production in these fields to 750 million cubic feet per day from 2026 and to allocate one third of the production to Italy for export.

Although the two fields that are the subject of the agreement have been discovered before, it is stated that the agreement is “the most important agreement realized in 20 years”. The agreement between the parties on the development of the two fields in 2008 was updated, increasing Eni’s share of foreign partners from 30 percent to 37 percent.

What makes this agreement important is that it took place after the successive governments for the last 20 years, including the Muammar Gaddafi era, failed to make Libya attractive for global energy companies.

Critical voices against the deal are also rising. In fact, one of them is from UBH; Criticism of the content of the agreement by Oil Minister Mohammad Awn.

Saving the country’s gas industry from collapse

Libya suffers from the decline in production due to the aging of the gas fields, the limited investment opportunities required for the development of the fields, as well as the political instability and security weakness that erode production.

Added to this was the increase in domestic gas demand, resulting in power cuts in direct proportion to these increases. In fact, Petroleum Minister Avn declared that “there is no gas to be exported in his country”. Libya was forced to export gas to Italy within the framework of its contractual obligations.

If the situation continued like this, it would almost make Libya, which sleeps above the estimated 80 trillion cubic feet of gas reserves, almost a gas importing country.

Considering this situation in Libya, the new agreement signed with Eni will update the gas sector in the country, increase production, meet domestic demand and increase export volume. In this context, NOC Chairman Ferhat Ömer bin Kıdara also talked about the annual income of 8 billion dollars.

Estimating the cost of the investments to be made in two offshore fields as 7 to 9 billion dollars, Bin Kıdara stated that they can provide a net income of up to 13 billion dollars to the state.

Considering that its approved reserves are about 6 trillion cubic feet, one-fifth of Egypt’s Ez-Zahr Field, it is stated that production at the two sites can reach about 850 million cubic feet per day.

Another point as important as these developments is that Italian energy company Eni is investing in an 8 billion dollar project, which will encourage other international companies in the energy sector to return to the Libyan market.

In a country that imports everything but oil and gas, this gives the financial and business sector a more stable and credible image for investment outside of the fuel sector.

European ally of UBH Prime Minister Dibeybe

The agreement came under heavy criticism from Fethi Başağa, who was elected as the prime minister by the House of Representatives in Tobruk, as well as Petroleum Minister Avn from within the UBH itself. Despite this, the agreement fulfilled some of the political goals of UBH Prime Minister Abdulhamid Dibeybe.

Thanks to the agreement, Dibeyba gained an international partner who has a weight in the struggle for legitimacy between the two governments already existing in Libya (the Başağa government and the Dibeybe government).

On the other hand, the visit of the Italian Prime Minister Giorgia Meloni to the capital Tripoli and the signing of numerous agreements with the Dibeybe government within the scope of this visit contained more than one message to the outside.

Among these is the message that the capital Tripoli has become reliable during the Dibeybe government, as well as the message that international figures can be hosted in Tripoli.

The visits of the Italian Prime Minister, as well as the US Intelligence Director William Burns, will encourage others to visit Tripoli and strengthen the legitimacy of the Dibayba government.

In addition, these developments may encourage other European countries such as France and Germany, which are trying to supply their gas needs away from Russia, to sign similar agreements.

UBH’s signing of a gas agreement with Italy was also a response to Egypt and Greece, who objected to the hydrocarbon agreement signed between Turkey and UBH in October last year.

Opposition to the agreement

Despite being a member of UBH, Oil Minister Avn objected to the agreement reached with Italian company Eni, giving some reasons.

Avn said it was “unfair” to divide the investment cost of the deal equally between the state treasury and the Italian company.

The Libyan Minister also stated that it is unacceptable to increase Eni’s share from 30 percent to 37 percent.

Avn, who did not attend the signing ceremony, also evaluated the passing of the agreement through the Energy Council instead of the Ministry of Petroleum as a negative situation for the authority of the agreement.

Avn, in his criticisms, may be right in terms of economy, perhaps law. However, from a political or a holistic viewpoint, the NOC had to make some concessions to persuade Eni to develop the gas fields.

The situation becomes even clearer today, given that global companies that direct their fields of activity to clean energy are not interested in countries that do not have attractive laws for investment.

Politically, a strong European ally was needed to balance Russian and Egyptian support for the Başağa government.

This need became even more palpable after countries such as Egypt, Saudi Arabia, UAE, Jordan and Morocco boycotted the Arab Foreign Ministers Consultative Meeting held in Tripoli. While Qatar, Algeria and Tunisia attended the meeting at the level of Foreign Ministers, Oman, Palestine and Comoros were present with less diplomatic representation.

After this “failure”, UBH needed political support to reaffirm its international legitimacy. Even if the cost of this support is increasing the share of the foreign partner, sharing the investment cost and other things.

On the other hand, Italy needs an alternative to Russian gas and to diversify its energy sources. This need becomes even more understandable, especially considering that there is no single African country that can replace Russian gas, including Algeria.


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