According to Libya’s Central Bank, Libya’s oil and gas revenues decreased by 6% in 2019. A majority of state income comes from oil and gas revenues. Revenue fell to 31.4 billion Libyan Dinars (USD 22.49 billion) in 2019, down from 33.5 billion dinars in 2018.
Although the Tobruk-based government established a parallel central bank and controls most of Libya's oil production, the Tripoli-based central bank retains control over oil revenue, which is channelled through the National Oil Corporation.
Continued fighting over weekend may cause disruptions to oil production. Fighting near Zawiya port in western Libya forced the National Oil Corporation to announce it was considering closing the refinery and evacuating staff. A missile nearly hit the refinery on Friday. The NOC also said it was considering closing the El Sharara oilfield, which exports its crude oil through Zawiya port. Throughout the weekend, three bombs fell close to the oil storage tanks.
Zawiya is Libya’s largest functioning refinery, serving the Tripoli region and west and south of Libya.
Zawiya’s refinery itself has a capacity of 120,000 bpd, which the NOC plans to double in the coming years, and is critical for process the oil that comes from El Sharara, estimated at 300,000 bpd. Libya’s oil sector is struggling as is to engage outside investment due to the fighting, and having to shut it down again would be disastrous. El Sharara only resumed production in August.
Libyan oil production has been hit hard since fighting first began, with NOC Chairman Mustaffa Sanalla saying the country would need $60 billion in investment to develop and improve its refining sector.
Libya's National Oil Corporation (NOC) announced it had approved the acquisition of Marathon Oil Libya Limited's stake in the Waha concessions by the French oil giant Total, which amount to over %16 percent of the company. NOC said that Total would invest USD 650 million to develop Waha, to help increase production by 180,000 barrels per day (bpd). NOC further added that Total would invest an additional USD 150 million to "support social responsibility and sustainable development programmes in the areas adjacent to oil operations."
Along with Total's 16.33% holdings, the NOC maintains 59.18%, ConocoPhillips holds 16.33% and Hess holds 8.16% of the Waha Oil Company.
The massive influx of Libyans displaced around Tripoli due to the fighting into more central areas in the city is causing housing costs to skyrocket, posing a challenge to many Libyans. Around 120,000 have been displaced from their homes since the latest round of fighting began in April, according to UN estimates.
A two-bedroom in Tripoli rose from from around 1500 dinars a month (around $2500) before the renewed fighting in April to twice that price or more. In addition, tenants are being asked to leave considerable cash deposits months in advance, something that has become more difficult given the economic downturn. Also, although Libya's liquidity crisis has improved, salaries are often delayed, for those who have jobs.
Despite the influx from the outskirts of Tripoli, there has been little new construction since fighting began in 2011, and the cost for a two-bedroom has tripled in cost since 2014.
As the conflict continues and Libya's economy struggles, the reopening of a plastic manufacturing plant in Ras Lanuf provides an economic boost and some hope.
Libya's economy is largely dependent on energy resources, which due to the ongoing conflict and lack of investment in infrastructure, is struggling to maintain production. However, beyond energy, there are few bright spots in the economy.
The plastic manufacturer, operated by RASCO - Ras Lanuf Oil and Gas Processing Company, is a NOC subsidiary. It had been shut down for the past 8 years due to the fighting. The port was blockaded throughout the fighting, and attacked by ISIS fighters. According to Reuters, it reopened in October at a production capacity of 80,000 tonnes per year, with plans to double the output in coming years.
Libya’s state-owned National Oil Company seeks to revamp the sluggish industry and perhaps even the role oil plays in Libya’s economy. Speaking at a meeting of the Libyan Energy Sector Development Forum, which took place in Tunis last week (Oct 21-22), NOC officials said they seek to significantly increase oil production. Libya currently produces 1.3 million barrels per day (bpd). While this is the highest level reached since Qaddafi was overthrown, it is down from 1.6 million bpd output prior to the revolution. In fact, oil output has been consistently declining since 1969 when Qaddafi took power and when production stood at over 3 million bpd. This continued decline over the years was due to neglect and political interference. Some experts estimate Libya has the natural resources to produce as much as 5 million bpd, were its infrastructure to be modernised and at full capacity.
NOC announced its plans to increase its current output to 2 million bpd over the next 2 years, and to 2.2 million by 2024. However, such expansion would require a USD 15 billion investment for a 5-year plan. This would include bringing in new technologies and expanding and upgrading the national pipeline network, some of which was damaged by ISIS fighters in 2015 and has yet to be fully repaired.
The Tripoli government, which nominally controls NOC, agreed to transfer USD 1 billion for such improvements, although has yet to do so. As this is far below what is needed, NOC seeks to turn to the private sector to get foreign investment. In order to accomplish this, NOC would need to restructure its current relationship with the state, which collects all oil revenue directly into its coffers. NOC seeks an alternative arrangement which would have it receive the revenue directly and pay the state taxes and royalties instead. This form of arrangement would allow NOC more flexibility to seek out foreign investors and partners. In this format, the state would also resume the defunct Oil Ministry, which would act as a regulatory body. NOC also noted it wants to become more efficient, cutting some of the 15,000 employees it currently maintains.
Related to this, in response to the Tripoli-based GNA cutting off jet-fuel supplies to the rival Tobruk government, the latter announced it would establish its own refineries independent of NOC. The Tobruk government recently authorised a private Libyan firm (Rahila Oil Services) to build a refinery near Tobruk, in order to bypass Tripoli, and is negotiating with a foreign firm to construct the refinery on a Build-Operate-Transfer basis. NOC Chairman Mustafa Sanallah criticised the move as illegal.
Sanallah updated he was working to persuade foreign firms to return to developing Libya’s energy sector, including Russian and European firms. However, so long as the fighting continues, Libya will struggle to attract foreign investors. Sanallah, at an Atlantic Council meeting recently, went one step further and said Libya needs to start moving its economy away from dependence solely on oil.