The Regeneration of Libya’s Oil & Gas Sector
With oil and gas production set to resume to pre-conflict levels within the next year, the outlook for the sector is, at first glance, promising. However, such optimism is tempered by the need to establish political, legal and economic stability within Libya, in order to attract foreign investment.
By Danielle Beggs & Danielle Kent
RECENT STATISTICS SHOW that Libya has proven reserves of approximately 46 billion barrels of oil (the largest in Africa) and 55 trillion cubic feet of natural gas. In addition, experts claim that 60-70% of Libya remains unexplored and could contain an abundance of hydrocarbon resources for those willing to invest. If Libya is to derive long-awaited economic benefit
from its natural resources, then arrangements with existing contractors and the process for awarding new contracts to foreign investors must be legitimised as a priority.
Political Stability The national elections,
set to take place in June, represent a significant hurdle for the National Transitional Council, Libya’s interim central government. The NTC’s objective is to appoint a central, constituent assembly responsible for drafting Libya’s constitution, creating new state institutions and ultimately restoring stability to the country. However, escalating friction between the NTC and the administrative eastern province of Cyrenaica generates uncertainty about the role of a central government in new Libya. Indeed a move towards greater regional autonomy in the form of devolution of powers from the central government to regional authorities, or a federal system, whereby each region assumes a degree of sovereignty independent of the central government, appears to be a possibility. The NTC has maintained that the energy
the sector. Cyrenaica, for example, contains two- thirds of Libya’s oil reserves and has called for a semi-autonomous eastern regional government, based in the city of Benghazi. It has demanded fair representation for the province ahead of the national elections and has encouraged citizens to boycott the elections if this is not achieved. It is clear that the regeneration of the oil and gas sector is contingent on the creation of political and economic stability.
... a move towards greater regional autonomy appears to be a possibility
Contract Review In order to restore transparency and certainty
sector will remain the preserve of the new central government but, with 95% of government revenues coming from oil and gas exports, it would be surprising if regional administrations did not attempt to obtain some influence or control over
80 June 2012
within the O&G industry and to encourage the return of the international energy players to the country, Libya must review the terms of the existing contracts covering its oil and gas producing blocks. The NTC has already established a dedicated contract review council, which is tasked with investigating allegations of widespread corruption in the industry prior to the uprising – a process that will be continued by the new government, when elected. All key O&G contracts concluded by the Gaddafi regime will be subject to review. Libya’s National Oil Corporation recently confirmed the review process as a routine measure, in line with
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