Dean Mikkelsen
Libya’s Oil Minister criticises IOCs for not fulfilling development commitments amidst the nation’s ongoing post-2011 political and security challenges.
Libya, home to Africa’s most substantial proven oil reserves, has recently been in the spotlight following pointed criticisms from its Oil and Gas Minister, Mohamed Oun.
In an enlightening interview with S&P Global Commodity Insights on the 21st of November, Oun condemned international oil companies (IOCs) for not meeting their development commitments in the nation’s tumultuous oil territories, which have been engulfed in disarray since the ousting of Muammar Gaddafi in 2011.
The crux of Oun’s grievances lies in the period following the US decision to lift sanctions on Libya in 2004, which culminated in the engagement of predominantly US oil firms during Libya’s licensing round in 2005. These firms pledged to undertake comprehensive development plans and seismic surveys, but the ensuing political turmoil and conflicts have severely curtailed these initiatives.
The minister’s criticisms are rooted in a post-2008 environment where security concerns and political fragmentation have severely hampered operational capabilities. According to Oun, the IOCs have been remarkably lax since then, failing to act on specific project commitments.
The disruptions intensified post-2011, resulting in a notable downturn in oil production. A blockade in the summer of 2022 saw Libya’s output dwindle to 650,000 barrels per day (b/d), although it has partially recovered to around 1.2 million b/d, which is still short of its pre-conflict capacity.
Oun has been forthright in suggesting that IOCs failing to honour their agreements should relinquish their concessions to Libya’s National Oil Corporation (NOC). He accused these entities of leveraging Libya’s dependency on oil revenue and foreign expertise to renegotiate contracts for more favourable terms, which he perceives as unjust.
The interview also shed light on negotiations by TotalEnergies and ConocoPhillips with NOC to increase their paid cost to 13% from 6.5% without the oil ministry’s involvement. This move has been met with astonishment by Oun, who has been part of Libya’s oil sector since 1974. The companies and NOC have not publicly addressed these negotiations.
Oun also noted Eni’s successful renegotiation with NOC, which increased its share in a deal to develop offshore reserves, setting a precedent for other IOCs to follow. Such renegotiations pose a challenge to Libya’s sovereignty over its resources.
Despite the challenges, Libya is aiming to rejuvenate its oil sector with an ambitious target to elevate its production capacity to 2 million b/d within the next five years. This aspiration includes collaborations with existing IOCs and the advancement of extant fields.
Looking to capitalise on its untapped potential, Libya anticipates launching a licencing round in 2024 to invite exploration of several onshore and offshore blocks. This is part of a grander scheme to not just escalate oil production but also to amplify gas output, currently at about 2.6 billion cubic feet per day (bcf/d), with an enormous reserve of 56 trillion cubic feet (TCF).
Despite Libya’s lofty ambitions for its hydrocarbon sectors, the domestic demand for gas, particularly for electricity generation, is absorbing a large portion of its production, thus limiting export capabilities. Although the Mellitah Oil & Gas joint venture between Eni and NOC could technically export between 300-400 million cubic feet per day (MMcf/d) to Italy via the Greenstream pipeline, fulfilling domestic requirements takes precedence.
Oun’s assertive comments and the strategies he has outlined underscore the intricate balance between national goals, the realities of domestic consumption, and the role of international firms in Libya’s oil sector. His vision for a more resilient and self-sufficient Libyan oil industry is evident, but the route to realising such a vision, against a backdrop of instability and external influences, is laden with obstacles. As Libya moves forward, the global community remains watchful, eager to see how the nation will manoeuvre within the ever-evolving global energy market.
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