Jonathan M. Winer
Infrastructure decay & compounding risk
Libya’s infrastructure is aging, under-maintained, and increasingly fragile. The ongoing degradation includes not only oil and gas facilities, but also electricity generation, transmission networks, water systems, ports, and logistics corridors. Years of deferred maintenance, politicized budgeting, and fragmented authority have led to unplanned outages, environmental catastrophe, such as the September 2023 dam collapse that killed more than 4,300 Libyans and destroyed much of the eastern port city of Derna, and sharply higher future capital requirements.
Energy infrastructure does not fail in isolation. Oil and gas production depends on reliable power, functioning ports, intact pipelines, and predictable logistics. When electricity supply becomes erratic, processing facilities shut down. When ports or storage facilities degrade, exports back up. When water systems fail, workforce stability and public health suffer. Each failure compounds the next.
For Libyans, unreliable electricity and water impose daily economic and social costs, fueling frustration, protest, and political volatility. For investors, the implications are operational and financial. Infrastructure decay undermines assumptions about uptime, cost control, and project timelines, and increases exposure to force majeure events that are formally contractual but practically unrecoverable.
In this environment, energy projects cannot be insulated from systemic risk. Investors must assume that weaknesses in electricity, water, transport, and public services will increasingly shape operational outcomes. The Libyan government needs to invest in this infrastructure to meet the needs of its own people. Left unremediated, these risks also shape outcomes for foreign operators.
Why political support is not enough
External political engagement — whether by foreign governments or the United Nations — cannot by itself lower the risks of investing in Libya in the absence of domestic institutional reform.
The UN-facilitated political process remains stalled, constrained by unresolved disputes among Libyan institutions, most notably between the House of Representatives and the High State Council. There is little reason to believe this process will yield tangible political outcomes in the foreseeable future, and even less reason to expect it to resolve Libya’s economic or commercial constraints.
More importantly for investors, the UN mission has played only a limited facilitative role in Libya’s economic governance. During some periods, the UN Support Mission in Libya (UNSMIL) has supported specific processes, such as central bank audit and reunification efforts and crisis consultations. But it has not been an implementing actor on fiscal policy, budget execution, payment discipline, or exchange-rate management, which ultimately play a large role in determining whether energy investments are viable. When institutions are weak, operating budgets uncertain, payments discretionary, corruption entrenched, infrastructure degrading, and security contingent, political encouragement alone does not make projects bankable.
In some cases, political signaling can worsen outcomes. It can raise expectations without improving execution, encourage Libyan actors to hedge rather than commit, and prompt foreign firms to preserve optionality rather than deploy capital. The result is a familiar pattern: memoranda of understanding rather than final investment decisions; feasibility studies rather than capital commitments; announcements rather than sustained spending.
For Libya, this gap between political rhetoric and commercial reality has become structural. Until the underlying economic mechanics change, political support, however well intentioned, is unlikely to alter investment behavior, except where a sponsoring foreign government is prepared to act as a commercial backstop by absorbing or subsidizing risks that the Libyan system itself cannot credibly manage.
The instability factor
Libya’s current level of oil production has been sustained by a fragile military equilibrium, shaped in part by external involvement but not reducible to it. Since Turkey’s intervention to prevent Hifter from seizing Tripoli in 2020, Ankara has acted to deter renewed large-scale offensives by either side. That posture has helped constrain the conflict and has reduced the likelihood of an outright military resolution. It has not, however, resolved Libya’s underlying political or institutional fragmentation, nor has it eliminated other sources of instability. Internal political shocks, leadership changes, militia realignments, or shifts in external calculations could all disrupt the current balance even without a Turkish withdrawal.
For investors, uncertainty about Libya’s longer-term political stability remains decisive. The military equilibrium that has allowed continued production and exports does not rest on domestic institutions capable of enforcing contracts, resolving disputes, or providing predictable security. It is contingent, external, and subject to recalibration. Any significant change in Libya’s internal political configuration, or in the posture of key external actors, risks reviving uncertainty over territorial control, contract enforceability, and asset protection. In that sense, the same military conditions that have helped sustain production also reinforce Libya’s investability problem. Some stability now exists, but it is partial, potentially reversible, and could prove insufficient to anchor long-term commercial commitments.
What would change the calculation
Near-term steps could improve Libya’s investability at the margin, not by eliminating risk, but by reducing uncertainty in ways that matter to commercial decision-making.
First, a credible, approved operating budget for the NOC, paired with a transparent and time-bound plan to clear arrears to service companies, would materially reduce operational risk. Regularized budgeting would stabilize contractor relationships, enable preventive maintenance, and reduce the likelihood that arrears translate into sudden service withdrawals and production losses. For investors, the central issue is not the absolute level of debt, but whether payment obligations are predictable and honored.
Second, predictable payment mechanisms for foreign contractors would address one of Libya’s most persistent deterrents to investment. Ring-fenced escrow structures funded directly from oil revenues would reduce discretionary interference in payments and allow companies to price risk more clearly. Without insulation from political liquidity pressures, even technically successful projects remain commercially fragile.
Third, exchange-rate reform is unavoidable. Maintaining a fixed official rate while rationing access to dollars transfers rents to politically connected importers, entrenches corruption, distorts prices, and drains public resources. Moving to a floating exchange rate would collapse much of the arbitrage that now dominates Libya’s political economy. Combined with replacing generalized fuel and commodity subsidies with direct cash stipends to households, such reform would redirect resources away from rent-seekers and toward ordinary Libyans, while restoring fiscal transparency and policy credibility.
Fourth, clarity around licensing and contract authority is essential. While the NOC is the legally mandated body for hydrocarbon contracting, other Libyan officials have recurrently blurred lines of authority and reopened settled decisions. Investors need confidence that licenses and contracts will not be revisited, contested, or renegotiated as political leverage shifts.
Finally, visible improvements in gas infrastructure, power generation, and basic utilities would signal institutional capacity. Gas output, electricity supply, and water systems are not peripheral to energy investment; they are enabling conditions. Investors will not commit long-term capital if the systems that support operations are visibly deteriorating or dependent on crisis management.
None of these steps require elections or a comprehensive political settlement. All of the measures outlined require political restraint, institutional discipline, and a willingness by Libya’s most influential political actors to reduce discretionary control over revenues and rents — conditions that may be harder to secure if meaningful foreign investment proceeds in the absence of reform.
Tests of seriousness
For US companies considering re-entry, several observable indicators will matter far more than rhetoric.
Are service companies being paid on time, with arrears stabilizing or declining rather than continuing to accumulate? Are gas exports and domestic gas supply stabilizing quarter over quarter, or continuing to deteriorate? Is the gap between official and parallel exchange rates narrowing in a sustained way? Are letters of credit processed and settled predictably rather than selectively? Are fuel shortages in Tripoli easing, or becoming more frequent and more politicized? Are new licenses and approvals honored consistently across political divides? And when disputes arise, are they resolved by institutions — or by shutdowns?
Until these indicators move decisively in the right direction, Libya is likely to remain a familiar category for energy executives: geologically attractive, politically supported, but commercially constrained.
Conclusion
Libya is not Venezuela. Its reserves are more valuable and easier to develop, its oil is of higher quality, and its NOC retains a level of technical competence that Venezuela now lacks.
But the comparison remains instructive. Resource wealth does not equal investability. And political enthusiasm does not overcome structural risk.
For now, Libya remains a country where existing operators struggle to extract consistent value, and where new entrants face barriers that political backing alone cannot resolve. Whether that changes will depend less on announcements and diplomatic signaling than on whether Libya’s institutions can do what investors ultimately require: pay on time, honor contracts, maintain infrastructure, and keep the lights on.
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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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Middle East Institute
