Matteo Battisti: Who is Libya’s oil actually for?

Libya’s oil situation is being narrated as an economic recovery, a technical achievement or an investment story but that framing hides what is actually happening as the country is signing decade long sovereign commitments while remaining unable to say who has the authority to sign them or who the oil is for.

What Libya faces in its oil sector today is not a production problem, the fields are working, the terminals are open, the majors are returning and the revenue is arriving in quantities the country has not seen in more than a decade.

The problem is that none of this passes through a legal order capable of receiving it.

On August 24th the National Oil Corporation signed a production sharing agreement with Chevron covering an onshore block in the Sirte Basin, roughly 7,437 square kilometres of Libya’s most productive oil region with estimated proven and probable reserves of around 100 million barrels of oil equivalent, marking the first time the American major has officially entered the country.

The sequence is therefore complete, sell crude, deduct the import bill, distribute the imports below cost, watch part of them leave the country again through smuggling networks.

The agreement formalises the results of Libya’s 2025 licensing round, the first since 2007, in which blocks also went to Eni, QatarEnergy, Repsol, the Turkish state company TPAO and Hungary’s MOL.

The production numbers appear to confirm the recovery narrative as crude output has reached 1.43 million barrels per day, a thirteen year high, with the NOC targeting 1.5 million by the end of this year and two million by 2030, while in May the corporation reported close to four billion dollars in revenue from crude sales and royalties, its strongest month in ten years.

This is the version of Libya presented at energy conferences, a country with Africa’s largest proven reserves, cheap barrels close to European refineries, a technocratic national oil company and a queue of international partners willing to accept political risk in exchange for geology.

Libya’s oil is being sold by institutions that cannot say who they are selling it for.

The first place this becomes visible is in the money itself.

When the NOC publishes its monthly figures it reports crude production, the split between the Libyan state’s share and the share allocated to international partners, export volumes and the dollars transferred to the sovereign account at the Libyan Foreign Bank, and for June that meant 41.87 million barrels of crude with 3.26 billion dollars transferred, while July showed 41.7 million barrels and 2.26 billion dollars.

Contained in the same disclosures is a detail that matters more than any headline figure, as the dollars transferred to the Libyan Foreign Bank are used first to cover letters of credit for fuel imports and only the remaining balance moves on to the Central Bank of Libya.

That single arrangement explains most of Libya’s fiscal condition, the country exports crude and imports refined fuel because its refining and distribution capacity has never recovered from fifteen years of disruption, so the cost of the imports is deducted at source before the revenue reaches the institution supposed to allocate it.

What arrives at the Central Bank is therefore not the oil rent but what survives an import bill that no authority has managed to reduce.

Then comes a second deduction that appears in no ledger, as Libya’s subsidy system distributes that imported fuel domestically at a fraction of its cost and a significant share of it never reaches a Libyan driver.

On August 26th a delegation from the joint committee of the Audit Bureau and the National Anti Corruption Commission met representatives of the United Nations in Tripoli specifically on this question, in a meeting attended by officials from the UN Development Programme, the UN Office on Drugs and Crime, UNSMIL and the World Health Organisation, and the participants examined the effect of the subsidy system on public finances and the openings it creates for diversion and smuggling, calling for stronger oversight and for holding to account those exploiting the system.

The sequence is therefore complete, sell crude, deduct the import bill, distribute the imports below cost, watch part of them leave the country again through smuggling networks and arrive at a Central Bank balance bearing little relation to the four billion dollar months the NOC announces.

This is not a leak in a functioning system, it is the system, and it has survived every political arrangement Libya has produced since 2014.

The second place the problem becomes visible is in the contracts themselves.

A production sharing agreement is a long dated instrument as exploration, appraisal, development and production across a block of that size is measured in decades rather than electoral cycles, and its entire commercial logic depends on the assumption that the counterparty will still exist, still be recognised and still be bound twenty years from now.

Libya has been divided since 2014 between the Tripoli based Government of National Unity under Abdulhamid Dbeibah and the eastern administration backed by the House of Representatives and the Haftar aligned command, the country has no permanent constitution, its last parliamentary elections were held in 2014 and rival courts in Benghazi and Tripoli continue to issue contradictory rulings on the same appointments.

As the NOC is the closest thing Libya has to a genuinely national institution, it has continued operating through civil war, blockade, a central bank crisis and repeated shutdowns, both sides of the division extract benefit from it which gives both an interest in its survival and international partners have contracted with it throughout the division without so far seeing their titles voided.

That argument nonetheless proves less than it appears to, as contractual continuity has held until now because no unified authority has emerged with the standing to challenge it, which is not stability but the absence of anyone capable of creating instability.

The moment Libya produces a government that can credibly claim to speak for the whole country, which is the stated objective of every diplomatic initiative currently running, that government inherits a bunch of agreements concluded during the division by a corporation whose own board appointments have been contested under a framework no sitting legislature has ratified.

A new authority looking for early legitimacy has an obvious and inexpensive way to obtain it as it need only announce a review of contracts signed while the country was divided and it need not reject anything since the announcement alone reprices the risk on every asset in the portfolio.

Libya’s oil is being sold by institutions that cannot say who they are selling it for.

Two weeks before the Chevron signing a drone struck the Zawiya refinery west of Tripoli, Libya’s largest operational refining facility, igniting stored gasoline and causing the collapse of a tank holding around 1.2 million gallons with further drones targeting the plant the following day and again during firefighting operations, while no group claimed responsibility and the Government of National Unity promised to identify and prosecute those responsible.

Zawiya is not a remote location in the Fezzan but it is the refinery supplying western Libya on the coastal corridor between Tripoli and the Tunisian border and it was struck repeatedly by drones in a country formally under a United Nations arms embargo.

The same period saw armed clashes in Zawiya and Surman that closed the coastal highway, damaged electrical substations and produced a mass escape from Surman prison while Libyans across the west shut roads and blockaded the foreign ministry in Tripoli demanding an end to power cuts and to the corruption they hold responsible for the decay of the grid.

A population sitting on one of the world’s great hydrocarbon endowments cannot reliably keep the lights on in August.

Libya’s institutional conflicts are not adjacent to its oil sector but they are conducted through it, because the oil sector is the only leverage any faction genuinely holds.

Output has recovered to a thirteen year high, revenues have reached decade records and the subsidy system still leaks, the refinery still burns, the grid still fails and the Audit Bureau is still sitting in meetings with United Nations agencies discussing how to stop public money disappearing.

The rent grew while the institutions did not, and there is no mechanism by which the next barrel changes that.

The NOC has spent the past year stating publicly that it operated through 2025 without an approved operating budget while its debts to service companies and suppliers accumulated, a situation produced not by technical failure but by rival authorities choosing to keep the country’s revenue generating institution short of money as a form of leverage over each other.

Deferred maintenance is how production declines begin, foreign technical partners are genuinely needed and Chevron’s money is not the problem.

A population sitting on one of the world’s great hydrocarbon endowments cannot reliably keep the lights on in August.

The problem is the sequencing and the assumption buried inside it, that a country can contract its way to an authority it does not possess.

The damage this does is not only external as it falls on Libyans first.

A subsidy system that leaks does not deliver cheap fuel, it delivers queues at petrol stations while the product crosses the border, an oil revenue stream consumed by import letters of credit does not fund salaries, hospitals or the electricity grid but merely repays the consequence of a refining sector nobody has rebuilt yet.

Libyans are told that the oil belongs to them and in law it does but ownership without an institution capable of enforcing it is a description rather than a right.

Libya’s leaders speak frequently about sovereignty, they condemn foreign interference, they reject external pressure and they insist that any political process must be Libyan led and on oil in particular the language of national resources is used constantly.

Sovereignty over resources however is not the right of elites alone to sign agreements without scrutiny, it is the capacity to publish the terms, to collect the revenue, to allocate it through a budget approved by a body with the standing to approve it and to account for it afterwards.

By that standard Libya’s sovereignty over its oil is not being defended by the current arrangement, it is being quietly transferred, not to any foreign company but to whichever domestic actor happens to control a valve, a port, a bank account or a board appointment at a given moment.

The international dimension carries its own contradiction as governments cannot express concern about Libyan governance while competing for exploration acreage and cannot support institutional unification while contracting with whichever authority is most convenient for their own energy security.

The interest in Libyan barrels is not hidden, non Gulf supply close to European refineries is strategically valuable and the return of the majors reflects that value rather than any assessment that Libya’s legal order has improved.

Foreign demand may deepen the problem, yet it is Libyan authorities and de facto power holders who fail to publish contracts, who tolerate the diversion of subsidised fuel, who leave the NOC without a budget and who use production as an instrument in disputes that have nothing to do with production.

Contracts should be published as if the NOC’s disclosure policy is genuine then the production sharing terms concluded under the 2025 round should be public documents rather than summaries in press releases and Libyan citizens as the beneficial owners of the acreage are entitled to read what has been agreed on their behalf.

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That reporting has already diverged on the basic identification of the Chevron block, with some outlets naming Area 106 and others Block S4, is not encouraging for transparency in an eleven figure sector.

End the deduction as until fuel import letters of credit stop being cut off from the top of sovereign revenue Libya does not have a budget in any meaningful sense but a residual and the Audit Bureau’s work with United Nations agencies on subsidy reform matters considerably more to ordinary Libyans than any licensing round while receiving a fraction of the attention.

Resolve who signs, not who signs oil contracts as that question has an answer everyone currently tolerates, but who signs for Libya, because until the 4+4 text is ratified by institutions with the standing to bind the country every agreement concluded in the interim carries a significant legal risk that the parties have chosen not to name.

Libyan citizen should be able to read the terms under which their country’s reserves have been committed, whether the revenue reaches a budget before it reaches a deduction and whether any institution exists with the authority to enforce the answer against an armed group, a rival government or a board that owes its appointment to neither.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Maghrebi.org. Matteo Battisti is a staff writer on the weekly magazine Libya Gazette and a specialist on Libya.

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