The increase allayed lingering concerns in the West after several months of a shocking blockade that almost brought production to a standstill. This is after militias allied to one of the rival camps had besieged oil installations, demanding a share of revenues.
The crisis was resolved in July when the Tripoli-based government replaced the head of Libya’s National Oil Corporation (NOC) – the veteran Mustafa Sanalla – with Farhat Bengdara.
The move appeased the eastern camp, which is where parliament is based and where Field Marshal Khalifa Haftar wields power. It also paved the way for the resumption of crude production.
However, maintaining the current levels of production, further boosting it and opening new markets in Europe remains a challenge as the political turmoil drags on.
Libya was hoping that the presidential and parliamentary elections – slated for December last year – would bring back a sense of normalcy. The NATO-led military campaign, which deposed autocratic leader Muammar Gaddafi in 2011, ushered in years of infighting and civil strife.
[There is] need for more stability and investment to bring total output at least back up to its pre-2011 level of 1.7 million bpd
Prime Minister Abdulhamid Dbeibah, whose government is internationally recognised, refused to cede power after elections failed to materialise, over legal wrangling. The east-based parliament then picked former interior minister Fathi Bashagha as prime minister, setting up fresh rivalry.
“Over the past few years, Libya has shown that, in the absence of major violent conflict, and despite persistent institutional divisions, it can still keep total oil production of around 1.0-1.1 million bpd,” Riccardo Fabiani, North Africa project director for the International Crisis Group, tells The Africa Report.
He says the output is likely sustainable in the short to medium term, “as the NOC is able to invest in maintenance operations and regularly pay its salaries and suppliers”.
Even so, in the long term, “there are some major issues related to the very limited investment in upstream exploration to add new production capacity that has taken place over the past 11 years. [There is] need for more stability and investment to bring total output at least back up to its pre-2011 level of 1.7 million bpd”.
The NOC says it plans to increase daily production to up to 2 million barrels of oil in three to five years, a target some critics have dismissed as overly ambitious.
“I am sceptical that without a political agreement and institutional reunification, Libya will be able to go beyond the current level of 1.0-1.1 bpd and there is a risk that even this level could gradually decrease in the next [few] years without significant upstream investment and new partnerships with foreign companies,” Fabiani says.
Eni, BP gas agreement
Libya is targeting such partnerships. In late October, an agreement with Italian energy company Eni and Britain’s BP to “start drilling and producing gas in the Mediterranean” was revealed.
The field from which Eni and BP should extract natural gas is even bigger than Egypt’s giant offshore field of Zohr, Bengdara said in an interview with Sky News Arabia. Eni will also invest $8bn to develop natural gas fields in Western Libya, with the country expecting between $35bn and $37bn in oil revenue this year, he adds.
There are several question marks around offshore drilling in Libya’s offshore zone.
There is some potential in this agreement, but critics say it’s still too early to determine whether that could be really of help as Libya seeks to boost its exports to Europe, which is grappling with an energy crisis stemming from Russia’s invasion of Ukraine.
Last year, Libya said it had generated revenues of more than $21.5bn from its oil and gas exports, which marked its highest figure in five years.
“There are several question marks around offshore drilling in Libya’s offshore zone. Barring the Tripolitanian Basin, which has two offshore projects, the other parts of the sea are under-appraised and untapped,” says Viktor Katona, lead crude analyst at data and analytics firm Kpler.
“So the idea that another Zohr is waiting there at the bottom of Libya’s territorial waters is by no means a guarantee and much of the rhetoric spinning the exploration drive of ENI/BP is very premature. Second, even if there is anything in there, most probably it’s going to be natural gas and most probably it would end up in Italy, a country that really is seeking to diversify its sources of gas, with it having no nuclear recourse option,” says Katona.
Infrastructure to export?
In October, local Libyan reports said the North African country was also considering building a new pipeline parallel to the Greenstream, which runs from Western Libya to the Italian island of Sicily.
The reports quoted oil and gas minister Mohammed Aoun saying it could take between four to six months to complete the pipeline. This target had also been deemed unrealistic by critics, even though it raised hopes that Libya could benefit from Europe’s growing need for gas in the winter.
- In 2020, Libya’s natural gas exports amounted to 4.87bn cubic metres, according to data provider Statista. That’s far behind the continent’s top exporter Algeria, which exported about 40bn cubic metres in the same year.
- Earlier this year, Algeria signed a deal with Italy to increase its gas supply to the European country by around 40%.
“Libya’s production is very hard to increase in the current political context, which is not conducive to foreign investment,” says Fabiani.
“In the short run, Libya is more likely to focus on maintaining existing oil and gas production levels, rather than rapidly ramping up output and exports.”
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