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Uncertainty and instability damage Libyan oil sector optimism

24 February 2025

 

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Optimism among stakeholders in Libya’s oil and gas sector has evaporated in recent months as the approval of the country’s budget has been delayed and instability has undermined operations at state-owned oil and gas companies.

In early February, the UN Support Mission in Libya (Unsmil) called for all the conflicting parties in the North African country to start work immediately on agreeing on a unified state budget.

It said a transparent and equitable budget is crucial for strengthening fiscal responsibility, optimising resource allocation and ensuring economic stability in Libya.

Unified budget

A unified budget is also expected to enhance the ability of the Central Bank of Libya to implement effective monetary policies, stabilise the exchange rate and manage public spending sustainably.

Several meetings have been held to attempt to reach an approval on a unified budget for 2025, but little progress has been made by Libya’s rival political factions towards reaching an agreement.

In December, Stephanie Koury, acting UN special representative for Libya, said: “A unified budget is essential to establish clear spending limits and ensure transparent management of public resources.”

Libya’s oil and gas industry is one of the most important sectors, in terms of generating government revenues, that has been impacted by the budget delays.

One industry source said: “If a unified budget isn’t approved within the next 30 days, the consequences are going to be very serious.

“You can forget about all of the progress that has been made in the country’s oil and gas sector over the last two or three years – we are going to set right back to square one.”

Without a budget being approved, state-owned oil companies are struggling to push forward with their investment plans and the development of projects.

Licensing round

As well as ongoing delays to projects and approvals in Libya’s oil and gas sector, the country’s plans for its first oil and gas licensing round in 15 years are being delayed.

In January 2024, Libya’s National Oil Corporation (NOC) announced its plan to launch the round.

The bid round for exploration and production agreements was expected to offer exploration blocks in the Murzuq, Ghadames and Sirte basins.

As well as ongoing delays to projects and approvals in Libya’s oil and gas sector, the country’s plans for its first oil and gas licensing round in 15 years are being delayed.

Throughout much of 2024, there was significant optimism that the round would be launched without major delays and that it could support the country’s plans to boost oil and gas production.

In 2024, NOC announced a plan to execute 45 greenfield and brownfield projects to try to boost the country’s oil production from 1.25 million barrels a day (b/d) to 2 million b/d.

Libya is aiming to hit its 2 million b/d target within three years.

It was initially expected that the planned licensing round would be launched in late October or early November of 2024.

However, in October, delays started to be announced – and now stakeholders have significant doubts about whether the round will be launched before the end of 2025.

The budget delays and other ongoing disagreements between the country’s rival political factions are damaging the image of the country’s oil and gas sector and are likely to make international companies less interested in participating in the bidding round, if it is eventually launched.

One industry source said: “In the middle of last year, a lot of big international companies were showing interest, but now it is all negativity.

“People were talking about the licensing round and new projects, as well as expanding existing projects.

“Now, all of those discussions have evaporated.”

Sentiment is also being damaged by clashes in the country.

In 2024, there were several violent clashes between militias, including in Zawiya in July.

These were followed by further hostilities in the same region in December, which occurred next to the Zawiya refinery and caused a major fire at the facility.

Oil sector leadership

Instability in Libya’s oil and gas sector has been exacerbated by major changes in senior positions within the country’s publicly owned oil and gas companies and the oil ministry.

In June 2024, Libya's sidelined oil minister Mohamed Oun called on Tripoli-based Prime Minister Abdelhamid Dbeibeh to clarify who was in charge of the ministry.

Exactly who ran the oil ministry became unclear after Oun returned to work on 28 May 2024, following the lifting of a temporary suspension by a state watchdog.

During his absence, Oun was replaced by oil ministry undersecretary Khalifa Rajab Abdulsadek, who represented Libya at an Opec+ meeting on 2 June.

Oun complained that Dbeibeh refused to recognise him as oil minister after his return to work, and Oun then cut off all communication with him, making it impossible to carry out his duties.

Oun was ultimately officially replaced by Abdulsadek, who continues to run the ministry.

NOC has seen other major changes. The resignation of chairman Farhat Bengdara was accepted in January and he has been replaced by acting chairman Massoud Suleman.

NOC subsidiaries have also seen tumultuous changes in recent months.

In mid-February, the chairman of Libya’s state-owned Waha Oil Company, Fathi Ben-Zahia, was detained on several charges, sparking concerns about the future of oil and gas projects in the country.

Waha is one of the biggest and most active subsidiaries of NOC and is responsible for some of the country’s biggest active oil projects.

The charges against Ben-Zahia include a LD770m ($156m) contract fraud, according to a statement issued by the country’s Attorney General’s Office.

The statement said that preliminary research by the attorney general’s deputy public prosecutor had revealed that the Waha chairman had awarded a contract worth LD770m for sea defences at the Sidra oil port, when a lower bid of LD339m was submitted by another company competing for the contract.

Prior to the arrest of Ben-Zahia, Waha was seen as one of the best-performing state oil companies in the country.

In November last year, Waha Oil Company reported its highest crude production level in 11 years.

The company recorded a daily output of 350,549 barrels, contributing to Libya’s total daily production of 1.4 million barrels.

Private sector

While the country’s public sector oil companies have run into more problems in recent months, and struggled to deal with issues related to the delays to the unified budget, Libya's first private company to export oil has seen significant growth.

Arkenu Oil Company, which was set up in 2023 and is linked to the faction that controls eastern Libya, has exported oil worth at least $600m since May 2024, according to shipping records and UN experts.

According to experts, this means that some of the country's oil revenue is likely being channelled away from the central bank.

One industry source said: “The activities of Arkenu Oil Company are worrying because it shows that institutions like NOC and the central bank are losing their grip on the country’s oil and gas sector.”

Economic problems

Projects in Libya are also suffering from broader economic issues that could get a lot worse if there are further delays to the approval of a unified budget for 2025.

NOC is already suffering from major cash flow issues that will be exacerbated by further delays.

It is also likely that value of the Libyan dinar against the US dollar on the black market will be weakened, and more pressure will be put on the country’s foreign exchange reserves.

Further currency weakness is likely to make it harder to import materials and equipment for new projects, as well as making it more difficult to get spare parts for existing facilities.

One source said: “Right now, the dialogue about oil and gas projects in Libya is changing dramatically.

“Before, we were talking about which new projects were going to get developed and how quickly. Now, we are no longer talking about new projects and there are concerns that existing facilities will face major problems.”

The ongoing challenges in Libya, and the failure to deal with key issues, means that in the future the country could see declines in upstream production rates and refinery throughput, rather than the expansions that were previously expected.

READ MEED’s YEARBOOK 2025

MEED’s 16th highly prized flagship Yearbook publication is available to read, offering subscribers analysis on the outlook for the Mena region’s major markets.

Published on 31 December 2024 and distributed to senior decision-makers in the region and around the world, the MEED Yearbook 2025 includes:

> GIGAPROJECTS INDEX: Gigaproject spending finds a level
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Wil Crisp

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    To see previous issues of MEED Business Review, please click here
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    Unified strategy 

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    The NDD has also introduced practical upskilling and financial tools. “We put in place a few tools, working together with ecosystem partners. For example, the Prequalification Platform, which was launched and is being operated with the Saudi Contractors Authority, [and] contractor upskilling bootcamps that have been delivered by our development companies to provide contractors with the basic understanding needed to be able to bid for projects.

    “A lot of effort went into making sure contractors have access to financing,” Abdimomunova adds.

    Indeed, addressing the finances of the construction sector was another critical area for the NDD. 

    By moving beyond traditional methods and practices, it has introduced more flexible liquidity options for the industry. 

    “We launched the Contractor Financing Programme to expand access to financing and strengthen liquidity for contactors supporting Saudi Arabia’s development pipeline. 

    “In partnership with the National Infrastructure Fund, we introduced guarantee mechanisms to unlock additional bank lending capacity, alongside a new product for the region: surety bonds – as an insurance alternative to traditional bank guarantees,” says Abdimomunova. 

    “Since receiving regulatory approval last year, 34 surety bonds have already been issued, helping contractors participate more effectively in large-scale projects.”

    Adjusting priorities

    With the foundational work established, the NDD is now shifting its focus towards streamlining the experience for international companies and tackling the sector’s long-standing structural hurdles. 

    Looking ahead, the NDD intends to tackle the perennial problems of the industry – payment delays and productivity – to ensure that the transformation of the sector is permanent.

    “Going forwards, our work will go one level deeper, focusing on resolving structural challenges and strengthening the underlying enablers that support private sector participation. 

    “We are working closely with our partners across Saudi Arabia to ensure these improvements are sustainable, scalable and embedded not only within the PIF’s ecosystem, but across the broader national economy,” Abdimomunova concludes. 

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    Morocco has been investing heavily in upgrading its infrastructure for the football World Cup, which it is co-hosting with Spain and Portugal.

    Morocco was effectively confirmed as a host country alongside Spain and Portugal in October 2023, after the group emerged as the sole bidder for the event. The official selection was announced in December last year.

    Along with building a stadium in Benslimane, the Moroccan government plans to revamp six existing stadiums in Agadir, Casablanca, Fez, Marrakech, Rabat and Tangier, and upgrade air, road and rail projects.

    Last year, Morocco’s transport and logistics minister unveiled a MD96bn ($9.5bn) investment plan to transform the country’s rail infrastructure by 2030.

    The announcement followed the award of about MD20bn-worth of contracts in November 2024 – mostly to local and Chinese firms – for civil works packages on the Marrakech-Kenitra high-speed rail line.

    The link will extend the Al-Boraq railway, a high-speed rail line between Tangier, Rabat and Casablanca. The line started operating in 2018 and was Africa’s first high-speed railway system.

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    Yasir Iqbal