Renewed Interest in Libya’s Oil Sector Sparks Economic Hope amid Operational Challenges

On Aug. 30, US Charge d'affaires Jeremy Berndt met with National Oil Corporation (NOC) Chairman Masoud Suleman to discuss how "US firms can help Libya strengthen its energy sector and achieve its goals of boosting production." This meeting also confirmed a 10-day high-level visit of a GNU delegation to Washington, which began Sept. 3 – a significant step for Libya in building a strategic economic and investment partnership with the US.

These diplomatic developments came after several major business moves in the region. On Aug. 4, ExxonMobil signed a memorandum of understanding (MoU) with the NOC, marking its return to Libya after a more than a decade-long absence. The agreement stipulates that ExxonMobil will conduct geological and geophysical studies in four offshore blocks near the northwestern coast and the Sirte Basin. On July 7, BP announced that it had signed an MoU with the NOC to evaluate renewed investments in the Sarir and Messla fields in the Sirte Basin and to assess potential unconventional oil and gas development. Additionally, Shell signed an agreement with the NOC on July 7 to explore opportunities at the Al-Atshan oil field and others wholly owned by the NOC.

These recent developments show a broader trend of international oil firms reengaging with Libya, which, despite political instability, remains one of the world's largest oil producers and a member of the Organization of the Petroleum Exporting Countries (OPEC). With these renewed partnerships, Libyan authorities aim to increase oil production and attract foreign investment amid shifting geopolitical and energy landscapes.  

Around 80 percent of Libya's oil resources are in the Sirte Basin, which sits at the limit between western and eastern governments. While most of the oil fields fall under the control of Haftar, this geographic situation has resulted in competition between the GNU, the GNS, and Haftar to seek control of the oil production. Through this control, the rival governments are seeking international credibility, as oil revenues are the only legitimate source of revenue for governments.  

However, such revenues have historically been used to funnel money and fuel corruption. Recent revelations regarding the privately owned Arkenu Oil Company illustrate the elaborate schemes used by Libyan authorities to circumvent the NOC's historic monopoly on oil exports. Under Libyan law, "all the petroleum that exists in Libya in its natural state ... shall be the property of the Libyan State." The NOC is therefore the only entity allowed to export oil and issue concessions or permits to private companies. However, a UN investigation reports that between May and September 2024, Arkenu exported six million barrels of crude worth USD 460 million. According to the same UN report, Arkenu is under the "direct control" of Saddam Haftar, son of the LNA commander, but its leadership also maintains close ties to Dbeibah and Emirati investors. Arkenu likely serves as a channel for disbursing profits from exported Libyan oil between the two rival governments.

Finally, armed groups also exercise substantial influence over the Libyan oil sector. Militias sometimes blockade oil facilities to extract concessions from authorities. Additionally, the lack of transparency and accountability in the management of oil revenues has allowed armed groups to amass unprecedented amounts of revenue from fuel-smuggling businesses. Libya's generous fuel subsidies incentivize smuggling by creating arbitrage opportunities for black-market actors to traffic fuel to foreign markets or domestic markets.  

Due to the Libyan security and political landscape, the country's oil sector, while a source of promising opportunities, continues to present significant risks for companies.

• Political Risk: While the eastern government does control economically significant territory, including where most oil fields are located, international businesses seeking to conduct commercial operations in such areas must negotiate agreements with the internationally recognized GNU or, in the case of oil-sector business dealings, the NOC. Directly dealing with the GNS or Haftar family without engaging the GNU or NOC would likely be considered illegitimate and could risk sanctions or other penalties.  
• Security Risk: While there is a seemingly durable status quo in eastern Libya due to the almost complete control exercised there by Haftar and the LNA, rival armed groups in Tripoli regularly clash. In May, armed clashes between GNU-aligned forces and RADA/Special Deterrence Forces (SDF) left at least eight people dead and dozens of others injured. The security environment in western Libya continues to be shaped by these confrontations, with sporadic armed clashes erupting in the capital and its surroundings.  
  
  Businesses operating in Libya also need to consider the significant disruptions and violence that can accompany protests, which generally block roads and can result in hostile takeovers of key areas. Collateral damage remains a considerable risk. Finally, the risk of kidnapping for ransom, either in the form of opportunistic abductions or politically motivated arrests, is severe in Libya. Businesses operating in Libya must implement strict security protocols for their personnel on the ground.
• Legal Risk: Due to the systematic corruption and entrenched armed groups in Libya's political and security landscape, businesses operating in the country must implement a rigorous due diligence process and legal frameworks to ensure compliance with international and national anti-corruption guidelines. 

Growing interest in Libya's oil sector has brought hope for economic renewal. However, it is unlikely that investment in the oil sector will bring long-term peace and stability to Libya, given that the country remains fundamentally divided, rival armed groups have increasing power and influence, and corruption, arms, drugs, and human trafficking remain significant sources of income. Without greater transparency and institutional cooperation, oil wealth will continue to be a source of rivalry rather than stability, undermining Libya's unity. The volatile security environment will also continue to pose significant risks for companies operating in Libya, and to benefit from substantial opportunities in the near future, businesses will need to implement strict security and operational protocols. 

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