S&P Global —13 August 2024
Daily Update: August 13, 2024
Competing Interests and Agendas Halt Libyan Oil Industry Growth
By Nathan Hunt
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In 2011, an uprising backed by NATO overthrew and killed former Libyan Prime Minister Moammar Gadhafi. Since then, chaos has become commonplace in Libyan politics, and volatility the norm for Libya’s oil output.
Oil plays an outsized role in Libya’s economy. Libya controls Africa's biggest oil reserves, estimated at 48 billion barrels. Libyan crude is also typically light and low in sulfur, making it popular in the Mediterranean and Northwest Europe. Despite considerable political instability, foreign oil companies, including Spain's Repsol, France's TotalEnergies, Austria's OMV and Norway's Equinor, are eager to partner with Libya's National Oil Corp. to tap into the country’s oil wealth.
Much of the instability in Libya is due to its division into two spheres with competing governments. In the west, the Government of National Unity in Tripoli, recognized by the UN, is run by Prime Minister Abdul Hamid Dbeibeh. The Libyan National Army controls the east, centered in Benghazi under the command of Khalifa Haftar. The UN and the Arab League have attempted to forge an agreement that could lead to long-delayed elections and a true national government.
The conflict between the two governments in Libya plays out in the allocation of oil revenue. Libya’s National Oil Corp., the Oil and Gas Ministry, and the Ministry of Finance are frequently at odds over this issue. There is also little stability within these three organizations.
Libya’s National Oil Corp. has seen operations suspended at the Sharara oil field, the country's largest, several times this year. Economic protests at Sharara in January shut down operations for two weeks. Last week, additional protests limited Sharara’s output. The latest protests were believed to have been ordered by Saddam Haftar, the son of Khalifa Haftar, after Spanish authorities issued an arrest warrant for Saddam Haftar based on their investigation of an alleged botched drone deal.
The Oil and Gas Ministry had two competing ministers until recently. Libyan Oil Minister Mohamed Aoun was suspended in March by the Administrative Control Authority, a government oversight body, over a corruption investigation. After Aoun was suspended, he was quickly replaced by Deputy Oil Minister Khalifa Abdul Sadiq, an associate of the nephew of Prime Minister Dbeibeh. Charges against Aoun were later dropped, clearing the way for him to return to his post. This created an unusual situation in which two different oil ministers were working in neighboring buildings in the capital. The situation appears to have finally been resolved last week when Sadiq was arrested on corruption charges related to unauthorized payments to a foreign company.
Despite the differences between various Libyan authorities, there is one point of agreement: The country needs to increase oil production. Libya has set a goal of boosting output to 2 million b/d in the next five years, which is higher than Gadhafi-era production. According to the latest Platts OPEC+ survey from S&P Global Commodity Insights, Libya pumped 1.16 million b/d of crude in June.
Today is Tuesday, August 13, 2024, and here is today’s essential intelligence.
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—Read the article from S&P Global Market Intelligence
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—Read the article from S&P Global Market Intelligence
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—Read the article from S&P Global Ratings
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—Read the article from S&P Global Commodity Insights
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—Read the article from S&P Global Commodity Insights
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—Listen and subscribe to the podcast from S&P Global Market Intelligence
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