Last October, British and Italian oil giants BP and Eni announced that they were set to return to explore Libya's vast oil reserves, cooperation halted in 2014 when fighting broke out.
However, because of continued fighting and erratic behaviour from both the Tripoli and Tobruk governments, international firms have largely avoided returning. In the case of BP and Eni – the sites in question are 3 major exploration blocks; 2 in the Ghadames Basin in the west and third in the Gulf of Sirte. BP purchased rights to these sites back in 2007 but withdrew in 2013 due to security concerns.
A new deal emerged in 2018, in which Eni purchased 42.5 percent of BP's stake in these fields with the intention of starting work in October 2019. Yet a year later, no work has started in building the rigs and infrastructure, and the foreign companies make no mention of these projects on their websites.
It seems the continued fighting and occasional US airstrikes against ISIS targets, especially around Sirte, would mean significant investment in what is still a chaotic place.
Beyond that, Libya's National Oil Company, NOC, is frustrated with both the UN recognised Tripoli government and the Tobruk based parallel government, which have impeded their operations by introducing further instability. The Tobruk prime minster Abdullah al-Thinni complains that the Tripoli government is not sharing oil revenues and demands a greater share of the current $2 billion a month the NOC brings in. The Tobruk government, backed by Haftar's LNA forces, currently controls roughly two-thirds of all oil production, but the Tripoli-based NOC collects the revenues. The Tobruk government claims that the Tripoli based GNA withholds its due share of the revenues, with Tripoli doing so claiming Haftar is using the fuel to enable airstrikes and the ongoing fighting. To complicate matters worse, Tobruk seized control of a major NOC subsidiary, the Brega Petroleum Marketing Company based in eastern Libya, to try and skirt the problem.
It is not only the infighting that has stymied oil production. The NOC reportedly is also frustrated by a lack in stability in the government's dealings with foreign companies. Thus, the Tripoli government's oil minister suspended operating licenses for the French Total and 39 other foreign firms in May 2019, because the EU leaders did not support the GNA during Haftar's April offensive. The GNA then backtracked and allowed the firms to submit new license applications, then turned course again and warned that if they did not do so quickly, other firms would fill their place. As of August, the companies remain in place and nothing happened on the ground. However, the lack of stability and chaotic and arbitrary approach is causing foreign firms, those already in country and those considering cooperation, to lose confidence and think twice.
Libya currently lacks domestic refining capability for its crude oil and therefore must import roughly two-thirds of its oil needs from abroad, primarily from Italy. A Chatham House investigation found that much of this is stolen by the various powerful militias in Libya, and then sold on the black market or exported back to Italy.
Oil production and revenues are far under what they could be. Libya currently produces 1.3 million bpd (barrels per day), but the NOC seeks to boost that production to pre-war levels of 1.6 million by 2020. Eventually, according to NOC chairman Mustafa Sanallah, NOC seeks to surpass levels of 2 million bpd by 2022. However, foreign investment and cooperation will be crucial to reach these lofty goals.
Recently, Sanallah visited neighbouring Algeria and invited energy company Sonatrach to return to operating in Libya. NOC and Sonatrach agreed to form a joint working group to explore possibilities.
NOC is further working to convince Egyptian companies that left when fighting broke out to resume suspended projects, including work to expand Libya's pipeline network for both oil and gas.
At least in the near future, Libya's economic stability is almost entirely dependent on getting its oil production back on track and expanding it. However to do so, it seems clear that it will need to attract international firms to resume and increase their investments. And, this can only happen if the two duelling sides can reach some sense of stability, which remains to be seen.