Simon Watkins
Libya aims to boost oil production to 2 million bpd by 2028, with new bidding rounds attracting major global energy firms. Rising political instability, including the recent assassination of a militia leader, threatens new oil blockades and production disruption. Eastern-backed forces may challenge Tripoli’s control over oil revenues, risking a repeat of costly shutdowns unless a revenue-sharing deal is reached.
Given that around 97% of its government revenues come from oil, it might seem obvious to all Libya’s principal factions that increasing production is a very good idea. There is plenty of scope to do so, as before the removal of long-time leader Muammar Gaddafi in 2011 it had easily been able to produce around 1.65 million bpd of predominantly high-quality light, sweet crude oil. Additionally positive back then was that production had been on a rising trend, up from about 1.4 million bpd in 2000.
Further increases were on the horizon to push output close to the circa-3 million bpd achieved in the late 1960s, with the National Oil Corporation (NOC) planning to roll out enhanced oil recovery techniques at maturing oil fields to that effect. Up until very recently, new plans were progressing well from the ‘Strategic Programs Office’ (SPO) to boost oil production from the current 1.4 million bpd level up to 1.6 million bpd within a year or so and then to 2 million bpd by 2028/29. However, rising political unrest again threatens not only to derail this process but also to see the imposition of widespread blockades on Libya’s existing oil output as well.
At the beginning of this year, oil minister Khalifa Abdulsadek stated that the country still required US$3-4 billion to reach the 2026/27 1.6 million bpd production target. Towards this end, early March saw Libya announce plans to launch its first oil exploration bidding round in over 17 years, with 22 areas up for grabs across the country, which still has 48 billion barrels of proved crude oil reserves in place — the largest in Africa. These include major sites in the Sirte, Murzuq, and Ghadamis basins as well as in the offshore Mediterranean region.
According to an update from the Oil Ministry in the middle of last month, the bidding had already attracted more than 40 applicants, including some of the world’s biggest and most technologically advanced oil firms. U.S. supermajor ConocoPhillips is one firm that has voiced its interest in expanding its operations in Libya, in which it currently runs the Waha concession. Other interest is likely to come from major firms from Europe, for which Libya has become one country targeted to substitute for lost supplies from Russia due to sanctions resulting from its 2022 invasion of Ukraine, as analysed in full in my latest book on the new global oil market order.
These may well include Italy’s Eni, Spain’s Repsol, Austria’s OMV, and the U.K.’s BP, OilPrice.com has been told by sources close to the bidding process. Each of these firms were quick to resume exploration activities in Libya following blockades last August that halted around 700,000 bpd of oil production, despite a 10-year hiatus in their activities beforehand.
That said, it may be that their patience will be tested again very soon as the possibility of new blockades rises sharply following the 12 May assassination of Abdul Ghani al-Kiklii – a militia leader and head of the Presidential Council-affiliated Stability Support Apparatus (SSA). According to a source who works closely with U.S. diplomatic initiatives in the country, spoken to by OilPrice.com last week, al-Kiklii was specifically targeted as retaliation for the shooting of Salaheddin Elnajih, chairman of the Libyan Post Telecommunications and Information Technology Company and an appointee of the Tripoli-based Government of National Unity (GNU) Prime Minister, Abdulhamid Dbeibah.
The GNU is the successor to the previous Government of National Accord (GNA). More broadly, the killing has been seen by rival factions as part of ongoing manoeuvres by Dbeibah and his supporters to consolidate his power through the elimination of key rivals in his main opposition groups. Following all this, it remains to be seen precisely how these opposition groups will react, but it is unlikely to portend well for the GNU government’s plans to boost oil production.
One group in particular may believe that the timing is right to launch another major offensive, political, economic and/or military, against the GNU, and this is Libya’s alternative government – the Government of National Stability (GNS), based in the east – which in turn is backed by Khalifa Haftar, the leader of the Libyan National Army. Early signs of trouble ahead was a report on 28 May that the NOC’s headquarters in the GNU-controlled Tripoli had been stormed by gunmen, although the NOC later bizarrely said that this had only been “a limited personal dispute”.
Nonetheless, shortly after the GNS’s Haftar threatened to declare blockades of key Libyan oil fields again due to such attacks on institutions such as the NOC and suggested that its headquarters be moved into the eastern area – controlled by the GNS and his army – which would be “safe”. He has made it clear since an agreement signed on 18 September 2020 that there can be no reconciliation in Libya between the opposing GNU and GNS governments so long as there is no sustainable equitable way for the country’s oil revenues to be distributed between the rival groups.
More specifically, at the time of signing the 2020 agreement that ended an economically devastating series of oil blockades across Libya, Haftar and his opposite number from the then-GNA at the signing, Ahmed Maiteeq, made an in-principle agreement to look into establishing a commission not only to determine how oil revenues across Libya are distributed but also to consider the implementation of several measures designed to stabilise the country’s perilous financial position.
The blockade from 18 January to 18 September cost the country at least US$9.8 billion in lost hydrocarbons revenues. Key to this tentative agreement was the formation of a joint technical committee, which would – according to the official statement: “Oversee oil revenues and ensure the fair distribution of resources… and control the implementation of the terms of the agreement during the next three months, provided that its work is evaluated at the end of the 2020 and a plan is defined for the next year.”
In order to address the fact that the then-GNA – and now GNU — effectively held sway over the NOC and, by extension, the Central Bank of Libya (in which the revenues are physically held), the committee would also “prepare a unified budget that meets the needs of each party… and the reconciliation of any dispute over budget allocations… and will require the Central Bank [in Tripoli] to cover the monthly or quarterly payments approved in the budget without any delay, and as soon as the joint technical committee requests the transfer.”
Due to the influence of various domestic and international disruptive elements – notably Russia – since that idea was mooted it has never been properly implemented. However, there is still hope from several quarters – including the U.S. and U.N. – that such a deal could work well, and indeed that it might still be able to solve the ongoing impasse over the country’s oil and gas revenues. In the meantime and in the absence of such a deal, it looks highly likely that Libya will remain subject to further oil blockades and shutdowns as part of the ongoing struggle its warring factions for control over Libya’s oil resources.
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