Libya’s oil sector remains at the mercy of lawless militias who can shut down production or export terminals at will and choke state revenues. As a result, state National Oil Corp. (NOC) has struggled to guarantee a regular flow of crude to long-term buyers. This has given Libya a wild card status in the oil market with the ability to rapidly raise exports or see output plummet, which immediately impacts global oil prices.

But competing stakeholder interests is fast emerging as another threat to the long-term viability of the sector, where power plays at elite level threaten to shake up who exerts control over Libya’s oil dealings. In particular, the increasingly fractious relationship between the head of the National Oil Corp. (“NOC”) and members of the Presidency Council is already impacting current investment plans and could affect the Opec member’s future oil output forecasts.

As the UN, Washington, the EU and regional states all pursue twin diplomatic tracks to resolve the country’s political and security crisis, politicisation of the oil sector is becoming hard to avoid despite strenuous efforts by NOC to maintain its independence.

Impact Points

  • The breakdown in relations between NOC Chairman, Mustafa Sanalla, and the Presidency Council has seen funds earmarked for the state oil firm’s investment budget withheld, which will impact future oil production.
  • The future control of the oil sector is at stake with a dispute between the Council and NOC having played out since May. Sanalla complains that Tripoli has sought to bypass the state oil firm and negotiate directly with international oil companies such as Germany’s Wintershall.
  • Maintaining NOC independence from competing political stakeholders in the country remains complex; but, while parallel state structures in the East such as a Central Bank and an Eastern state oil firm persist, they have gained little domestic political traction beyond Eastern Libya and have received no support from the international community, apart from Egypt.
  • Guaranteeing security in the oil sector remains a goal rather than a reality. A conference held at Windsor Castle, UK in October saw domestic and international stakeholders sign up to principles guaranteeing the security of Libya’s oil sector, where militia shutdowns have cost Tripoli U.S. $126 billion in lost revenue over the last five years.