Libya’s economy sustained by oil but political impasse threatens stability

Al-Monitor Pro Members

Kate Dourian

Non-resident fellow at the Arab Gulf States Institute

Jan. 9, 2024

Libya does not have a permanent, unified government. Nor does it have a date set for overdue national elections. Yet this has not prompted a flight of foreign energy companies or deterred investment in Libya’s oil and gas sectors. More than a decade after Muammar Gadhafi’s ouster, the country remains fragmented and energy infrastructure has often been caught in the middle of the power struggle between east and west. The international energy majors, mostly European companies like Eni and TotalEnergies, have held on to their assets in Libya and plan further investments. Russia’s invasion of Ukraine was one of the drivers for the push by Eni as Europe sought alternatives to Russian oil and gas supplies. As a South Mediterranean country, Libya is connected to the European gas network through Italy, hence its appeal as a supplier of natural gas to Europe as the EU prepares to wean itself off Russian gas by 2030. Libya is a patchwork of political and tribal factions — some of them heavily armed and supported by external powers — that have failed to find common ground despite international mediation efforts. The political fragmentation is also reflected in the energy sector, where the National Oil Company and the Oil Ministry are at odds over management and policy issues. The shutdown of the 300,000 b/d Sharara oil field by protestors on January 3 was one of the symptoms of the country’s malaise and political dysfunction. The country is home to roughly 40% of Africa’s proven oil reserves, and its low cost, high-quality crude oil remains an attractive prospect for the energy majors — even as Libya’s political future remains in limbo.