Jonathan M. Winer
When ExxonMobil recently advised President Donald Trump that Venezuela remains “uninvestable,” the company was not making a political judgment. It was offering a commercial one. Despite some of the world’s largest proven oil reserves, Venezuela’s political fragmentation, economic mismanagement, sanctions exposure, and payment risk continue to outweigh the attraction of its geology.
That assessment provides a useful frame for Libya today.
Libya, like Venezuela, is a resource-rich country, producing a higher-quality oil that is light and sweet in comparison to the heavy “sour” oil that Venezuela produces. And in principle, Libya could produce far more than it does. Libya’s National Oil Corporation (NOC) has long cited an installed capacity of roughly 1.6 million barrels per day (bpd) and has periodically pointed to the potential for higher output with sustained investment. In practice, however, Libya’s post-2011 experience has demonstrated how hard it has been to translate Libya’s geological potential into successful new energy production involving even the most committed international oil companies (IOCs).
That difficulty has not prevented renewed interest. Libya’s first exploration bid round in more than 17 years has drawn strong international attention, with the NOC offering 22 onshore and offshore areas under production-sharing terms and reporting interest from foreign companies.
Several major operators have resumed or expanded upstream engagement: Eni has restarted offshore exploration drilling after a multi-year hiatus, BP and Shell have signed agreements with the NOC to study hydrocarbon potential at multiple oilfields, and a broad set of international firms, including BP, Chevron, ExxonMobil, Eni, OMV, Shell, Sonatrach, and TotalEnergies, are qualified to participate in the bid round.
On January 24, Libya announced the signing of a 25-year development deal with TotalEnergies and Chevron that would see the French and American majors invest an estimated $20 billion in the North African country to boost oil production by as much as 850,000 bpd.
Additional deals may be in the offing as well. Speaking during the Libya Energy & Economic Summit over the weekend, NOC Chairman Masoud Suleiman said the results of the new bid round would be announced on February 11.
The question facing IOCs is not whether Libya has oil and gas to develop. It does. The question is whether the country’s current political, economic, and security conditions allow that potential to be converted into reliable returns — and whether near-term changes could alter that calculation.
Oil and fuel as political instruments
Libya’s political fragmentation remains unresolved. The country continues to operate under competing centers of authority, with an interim government in Tripoli whose mandate expired years ago, a rival eastern administration aligned with General Khalifa Hifter, and national institutions that are formally unified but routinely constrained by political interference. These continuing divisions shape fiscal behavior, security dynamics, and control over revenue.
The NOC continues to be the sole authority for hydrocarbon contracting under Libyan law. Foreign companies must contract exclusively through it. Any alternative creates acute legal, operational, political, and reputational risk. But the NOC’s ability to function as a credible counterparty depends on budgets, cash flow, and institutional protection. These all are currently lacking.
In January 2026, NOC Chairman Suleiman stated publicly that the corporation had received no approved operating budget throughout 2025 and that debts to service companies and suppliers had continued to accumulate. The situation does not reflect a technical problem, but rather political decisions by rival authorities to retain leverage over the country’s primary revenue-generating institution. In Libya’s past, mounting arrears have been among the clearest leading indicators of deferred maintenance, service-company pullbacks, and subsequent production decline.
Headline crude production figures illustrate both resilience and fragility. Average crude output rose to roughly 1.37 million bpd in 2025, up from approximately 1.14 million bpd in 2024 and the highest annual average in a decade. That recovery followed a dramatic collapse in 2020, when production fell below 400,000 bpd during the civil war triggered by Hifter’s failed attempt to seize Tripoli, backed by Russia, the United Arab Emirates, Egypt, and, more quietly, France, and reversed only after Turkish military intervention.
The lesson for investors is not simply that production can recover. It is that Libyan oil output remains vulnerable to political and military decisions unrelated to commercial performance.
Disruptions in Libya’s oil and fuel systems are not incidental. Armed groups, local communities, political factions, and institutional actors have routinely blocked fields, pipelines, export terminals, fuel imports, or domestic distribution to extract concessions, signal dissatisfaction, or renegotiate access to patronage.
For example, in August 2024, rival political factions used control over oil production and export infrastructure as leverage in a dispute over central bank authority, leading to the shutdown of multiple oilfields and export terminals, with more than half of Libya’s output going offline for weeks. Exports at major ports including Es Sidra, Ras Lanuf, and Zueitina were halted as eastern authorities threatened closure until political demands were met, underscoring how energy infrastructure is weaponized in domestic disputes.
The threshold for disruption is often low. Delayed payments, exclusion from revenue streams, or perceived disrespect can be sufficient. On the production side, even limited local control can halt output. On the consumer side, fuel shortages can be engineered or prolonged through diversions of imports, storage, and distribution, even when aggregate supply exists. The pattern is systemic rather than episodic.
In 2025, investigative reporting by the anti-corruption NGO The Sentry found that Libya’s subsidized fuel imports — necessitated by insufficient and unreliable domestic refining capacity — were widely diverted into smuggling networks controlled by armed and politically connected actors, with an estimated $6.7 billion worth of fuel siphoned off in 2024 alone.
While the report does not quantify the precise share of imports diverted, it characterized the scale as systemic rather than marginal, describing the phenomenon as a “major national crisis.” These diversions substantially reduced the volume of imported fuel available for legitimate domestic consumption and contributed to chronic shortages and elevated prices in the internal market, even as gross import volumes remained high.
Gas as an early warning signal
Gas production provides a particularly clear indicator of systemic stress. Unlike crude oil, gas requires continuous maintenance, reliable power, and sustained funding. When those conditions weaken, gas output is often the first casualty.
Libya’s gas exports to Italy via the Greenstream pipeline fell by roughly 30 percent in 2025, declining to about 1.0 billion cubic meters from approximately 1.4 billion cubic meters the year before, despite far higher theoretical capacity. The decline reflected underinvestment, infrastructure degradation, power constraints, and fiscal stress rather than geological factors.
Weakness in gas production also has domestic consequences. Gas supplies power generation and petrochemical facilities, meaning reduced output directly contributes to electricity shortages and broader economic disruption. When gas falters, it signals that there are deeper institutional and fiscal problems affecting the energy sector as a whole.
The economic constraint: Currency,
corruption, and parallel states
Libya’s fiscal and monetary pressures threaten the arrangements that currently sustain both western and eastern authorities. With oil prices hovering in the $60 per barrel range, hydrocarbon revenues are insufficient to cover public wages, fuel imports, and foreign currency demand simultaneously.
The imbalance is now stark. On January 13, 2026, the Central Bank of Libya (CBL) reported that oil revenues deposited so far in January totaled $287 million, while foreign currency sales during the same period reached approximately $1 billion.
Some of that outflow likely reflects accelerated food and commodity imports ahead of Ramadan. Roughly three-quarters of Libya’s food is imported. But the scale of the gap is striking and over time such mismatches can create mounting risks for creditors. According to the CBL, as of mid-January 2026, outstanding letters of credit from 2025 amounted to roughly $4.3 billion.
Currency markets have responded accordingly. During January 2026, the parallel exchange rate briefly reached 9 Libyan dinars to the dollar, signaling expectations of further devaluation and tightening access to foreign exchange.
A week later, the CBL devalued the Libyan dinar by about 14.7 percent, citing ongoing fiscal pressures, political division, and weakening oil revenues, with the official exchange rate moving to approximately 6.37 dinars per US dollar. This followed the previous devaluation by the CBL in April 2025 that reset the official rate at approximately 5.6 Libyan dinars per dollar after years of defending an unsustainable peg.
These pressures cannot be understood without reference to Libya’s post-2014 fiscal history. For years, eastern authorities financed spending through counterfeit dinars printed in Russia without authorization from the Tripoli-based central bank, enabling unconstrained expenditures outside any unified fiscal framework. To prevent complete monetary fragmentation, the unified CBL later absorbed much of this currency, monetizing a parallel fiscal state.
At the same time, two governments have co-existed, cooperated, and competed, both drawing on oil revenues and central bank liquidity to sustain patronage networks. Corruption is not incidental to this system; it is structural. Multiple exchange rates, discretionary letters of credit, fuel subsidies, and barter-style arrangements have transferred vast resources to politically connected actors, often with little corresponding delivery of goods or services and fueling inflation.
For foreign investors, the implications are direct. Payment risk is not hypothetical. The CBL has historically delayed or withheld payments to foreign contractors for political and liquidity reasons unrelated to contract performance. Unless addressed, this payment risk alone is sufficient to disqualify further investment by major IOCs.
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Jonathan M. Winer has been the United States Special Envoy for Libya, the deputy assistant secretary of state for international law enforcement, and counsel to United States Senator John Kerry. He has written and lectured widely on US Middle East policy, counterterrorism, international money laundering, illicit networks, corruption, and US-Russia issues. He is a Distinguished Diplomatic Fellow at the Middle East Institute.
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