Libya: oil sector revival risks entrenching internal divisions

Libya has reopened its oil sector to international competition for the first time in nearly two decades, as reported by The Libya Observer. The National Oil Corporation (NOC) announced on February 11 the outcome of its first public bid round in 17 years, offering 20 exploration blocks for oil and gas drilling.

The long-awaited licensing round signals a renewed push to expand production and draw foreign capital into the country’s vital hydrocarbons industry. Five international companies and consortia secured contracts covering exploration and development activities.

Libya remains politically fractured between rival centres of power in Tripoli in the west and Benghazi in the east, control over oil infrastructure and the distribution of revenues frequently intensify this divide. Energy sector revenues represents the country’s principal source of national income, which acts as critical political and economic weapon in the struggle for political dominance.

Libya’s renewed courting of major western and multinational oil firms risks reinforcing existing divisions between east and west Libya.  The bidding round brings in much needed investment, however it also brings with it external influence and interests in a country already struggling to assert genuine political autonomy, which contrasts to recent domestic and regional calls for an end to foreign interference and full Libyan sovereignty.

Critics argue that the entry of companies such as Chevron, Eni and Repsol into Libya’s oil fields could also entrench dependencies on foreign capital and technical expertise, effectively allowing these firms to profit from chronic instability rather than contributing to the long term sustainable development of the country’s national resources.

This dynamic mirrors past patterns in which international actors leveraged internal divisions in Libya to secure favourable terms and extract the country’s national wealth. Libya’s oil industry continues to struggle with infrastructure constraints, widespread corruption and the smuggling of fuel,

Western Libya’s monopoly over the NOC effectively resulted in the establishment of the Arkenu Oil Company in the east, Libya’s first private oil company. This allows Khalifa Haftar, leader of the Libyan National Army, to bypass Libya’s Tripoli-based institutions. It remains to be seen if the return of global energy companies to Libya will result in a more equitable distribution of income between Tripoli and Beghazi, or whether they will entrench the existing divisions in Libya whilst further reducing the power of the publicly owned NOC.

Among the successful bidders were Italy’s Eni, partnered with QatarEnergy; the consortium of Repsol, Tüpraş and MOL; a separate Repsol–Tüpraş partnership; US-based Chevron; and ATEO.

However, not all of the acreage on offer was allocated. According to the NOC, several blocks were left unawarded because submitted technical proposals failed to meet compliance requirements. Other blocks attracted no bids at all from participating firms.

NOC Chairman Masoud Suleiman said the corporation is committed to implementing the agreements concluded with the winning companies. He confirmed that non-compliant bids would be reviewed, adding that negotiations could be opened with participating firms in an effort to enhance their proposals.

Libya Observer, Maghrebi.org