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.