Memos 
Live events & webinars 
Industry Newsletters
Trend Reports
Libya’s oil production unlikely to reach 2 million barrels per day ever again
Al-Monitor Pro Members
Gerald Kepes
President, Competitive Energy Strategies, LLC
Feb. 8, 2023
When reference is made to Libya’s upstream oil sector, “abundance,” “rich” and “leading” are the words often used. While true enough when referring to crude oil resources, this is not the same as crude oil production capacity. Libya’s current capacity to produce crude oil is about 1.2 million barrels per day (b/d). Farhat Bengdara, the head of Libya’s National Oil Company (NOC) toward the end of 2022 stated a desire to increase output to over 2 million b/d over the medium term. Wishing will not make it so.
Achievable success for Libya is more likely to look like 1.5 to 1.6 million b/d within five years and sustaining that for five years. But this is not a foregone conclusion.
- Maps of Libya depict it as a mixture of frozen conflict and a failed state. Broadly speaking, the northwest corner of Libya, centered on Tripoli (and an oil production enclave in the southwest) is presided over by the Government of National Accord (GNA, backed by the United Nations, Turkey and others), and the northeast and central areas of the country are led by the Libyan National Army (LNA, headed by Gen. Khalifa Hifter, backed by Russia, Egypt and variously the UAE and Qatar). Tribesmen and militias hold sway over the southern border area of Libya; local militias are present and pervasive across all of Libya.
- “Frozen” does not mean forever; there are preparations for a national reconciliation conference that would purport to unite Libya. Previous efforts post-Gadhafi have failed to date and inform the challenges in achieving reconciliation. Still, improved relations between previously opposed foreign parties could bring about different calculations in Libya; perhaps the national unity coalition of forces will prove to be stronger this time around.
- Oil export revenues are paid into an overseas state-owned bank, then transferred to Libya’s Central Bank which issues salaries to over 1.5 million public employees on both sides of the conflict. This financial safety net creates a shared benefit and imposes shared pain if crude exports are constrained, and is a mechanism for unity. But at the same time plays a role in maintaining the status quo.
- Within the last three months, NOC Chairman Bengdara and Oil Minister Mohamed Oun have announced objectives to increase crude oil production capacity from 1.2 million b/d to 2 million b/d within three to five years. In early December 2022, Bengdara called for international oil companies to return to Libya and restart operations. These are aspirational goals.
- Current crude oil production is about 1.2 million b/d; the average for 2022 was roughly 1 million b/d. Prior to 1980, output was in excess of 2 million b/d much of the time, with a peak greater than 3 million b/d in 1970. The production record since is markedly different; the highest level achieved was just over 1.7 million b/d in 2008.
- Underlying decline rates for existing production are roughly 8% to 10% per year. If the decline rate is actively managed, meaning sufficient workover activity (including an adequate supply of downhole electrical submersible pumps [ESP]) for pressure maintenance, and infill drilling, this could be 7% to 8% per year. This means that roughly 80,000 to 100,000 b/d of new incremental crude oil output is required every year to maintain the current 1.2 million b/d capacity. This is not a small requirement.
- Construction, maintenance and rehabilitation of new and existing storage tanks and intra-field crude oil pipelines and takeaway capacity (to export facilities on the coast) is an absolute requirement for any significant increase in crude oil production capacity.
- Development and production operations are undertaken by various NOC subsidiaries. Some are 100% owned by the Libyan government (Sirte Oil & Gas and Agoco are examples). Others are joint ventures between NOC and foreign companies (Waha: TotalEnergies, ConocoPhillips; Mellitah: Eni; Akakus, Repsol, TotalEnergies, OMV, Equinor; Mabruk: TotalEnergies, Equinor; Sarir: Wintershall Dea, Gazprom EP International, are the most prominent). A number of foreign companies, including the above, hold exploration licenses, almost all in force majeure since 2014 (Medco, Tatneft, TPAO, OMV and BP, among others). The NOC operating companies (Opcos) have a number of highly experienced Libyan technical staff and workers but face ongoing challenges in available finance, technical constraints including lack of access to new surface and downhole equipment, not to mention the physical status of much of the existing equipment stock. Production operations are the primary, almost exclusive focus of the NOC Opcos. Exploration, where successful, has been largely operated by foreign companies.
- Exploration, future and past: In 2004, Libya celebrated a wider opening of its upstream oil and gas sector. Contingent on a series of political deals, US and British oil companies re-entered Libya and with a significant number of other international oil companies, participated in successive bid rounds for exploration acreage onshore and offshore. The Libya “opening” was a global event. At the time of the opening, the last period of substantial exploration activity had taken place in the 1960s; since that time, enormous strides in exploration technology had taken place; and the consensus was that there was likely to be substantial remaining exploration potential.
- At the end of the day, looking at the period from 2005-2010, after the acreage was awarded, exploration activity did increase substantially but the results were discouraging. There were myriad small discoveries, but nothing that really changed the profile. The EPSA IV (exploration and production sharing agreements) that came into force at that time had government take up to and in excess of 90%. Libyan oil is light, sweet higher quality crude but from a financial perspective, Libyan barrels are “thin” barrels.
- The impact of the energy transition on international company portfolios means that fewer basins qualify for the new portfolio choices that these companies make. The argument to enter a new country (in this case Libya) has to be extraordinarily compelling for those not already present. Of the larger energy companies engaged in upstream activity in Libya, acting via Opco joint ventures, TotalEnergies and ConocoPhillips are most focused on crude oil output, whereas Eni is more focused on boosting natural gas production and exports to Italy (via the Green Stream pipeline). BP retains some exploration interest, but Shell, Chevron, ExxonMobil and larger independents are extremely unlikely to enter or reenter Libya.
- On paper, additional volumes from potential new or incremental production sources are on the order of 600 thousand b/d. In reality, onstream dates are staggered or often delayed, and targets missed. Taking account of the underlying rate of decline, and based on existing portfolios, it is clear that in order for Libya to really change its production profile, from 1.2 million at current to 1.5 to 1.6 million b/d, the bulk of these new volumes will need to come from the Waha Opco. Waha, 59.18% owned by NOC, and 20.41% owned each by TotalEnergies and ConocoPhillips, respectively, must increase output from roughly 300,000 b/d to 600,000 b/d. But this assumes a conducive business environment. Meanwhile, the decline continues.
Scenario 1: Crude production capacity reaches 2 million b/d in five years, as per the stated goals of the leadership in Libya.
This would require four changes in the status quo. First, a politically stable Libya must be achieved within 2023, recognized by foreign investors. Second, an improvement in the EPSA IV fiscal terms. Third, higher budgets for the NOC. And fourth, immediate expansion of equipment imports, especially for downhole pressure maintenance, and a higher level of tightly spaced infill drilling. This scenario would appear to have a low probability. Two million b/d requires a higher level of exploration drilling and enhanced discovery sizes than achieved in the 2005-2010 period; this seems unlikely.
Scenario 2: Gradual steps are taken on some of the four critical elements above, with the emphasis on a more politically stable Libya.
The Waha, Agoco and Mabruk Opcos would need to realize the full production potential of their respective portfolios, netting an additional 450,000 b/d in aggregate. The other Opcos must sustain existing levels of output, offsetting the underlying decline rate. Results could attain 1.5 to 1.6 million b/d in this scenario. With progressive improvement in more of the aforementioned critical elements, that level of output could be sustained for some years. This scenario would appear to have a higher probability.
The most likely scenario assumes that Libya does not achieve significant steps toward national unity in the next 18 months, but experiences no major blockages in oil exports. In this scenario, crude output could average 1.3 million b/d but is uneven over the medium term. Output could dip below 1 million b/d for periods with local instability, leaks and shortages of needed equipment; in this period, production could achieve peaks of 1.4 million plus, but may not be maintained.
Based on these assumptions, one might conclude that reaching 1.5 million b/d and sustaining for five to seven years would be a significant achievement. A parallel focus on natural gas development, renewables and power generation construction could yield dividends for domestic political economy demands. Both TotalEnergies and Eni have proposed joint development of crude oil, natural gas and renewables within the past year.
The global business environment for hydrocarbons has changed over the last 10 years while an inwardly-focused Libya struggled with internal political divisions and the aims of foreign backers. Libya will have to adjust.
Gerald Kepes has more than 35 years of experience as a consultant and petroleum geologist in the global energy industry. Most recently, he was vice president in energy & natural resources for IHS Markit, and previously, a PFC energy partner, where he established PFC’s global upstream consulting practice. He also held various positions with a US oil company in North Africa and the Middle East.
To get Al-Monitor PRO updates straight to your phone, text ALM to (202) 978-4542.
We're glad you're interested in this memo.
Memos are one of several features available only to PRO Expert members. Become a member to read the full memos and get access to all exclusive PRO content.
Already a Member? Sign in
The Middle East's Best Newsletters
Join over 50,000 readers who access our journalists dedicated newsletters, covering the top political, security, business and tech issues across the region each week.
Delivered straight to your inbox.
Free
What's included:
Free newsletters available:
- The Takeaway & Week in Review
- Middle East Minute (AM)
- Daily Briefing (PM)
- Business & Tech Briefing
- Security Briefing
- Gulf Briefing
- Israel Briefing
- Palestine Briefing
- Turkey Briefing
- Iraq Briefing
Premium Membership
Join the Middle East's most notable experts for premium memos, trend reports, live video Q&A, and intimate in-person events, each detailing exclusive insights on business and geopolitical trends shaping the region.
$25.00 / month
billed annually
$31.00 / month
billed monthly
What's included:
Memos - premium analytical writing: actionable insights on markets and geopolitics.
Live Video Q&A - Hear from our top journalists and regional experts.
Special Events - Intimate in-person events with business & political VIPs.
Trend Reports - Deep dive analysis on market updates.
Text Alerts - Be the first to get breaking news, exclusives, and PRO content.
All premium Industry Newsletters - Monitor the Middle East's most important industries. Prioritize your target industries for weekly review:
- Capital Markets & Private Equity
- Venture Capital & Startups
- Green Energy
- Supply Chain
- Sustainable Development
- Leading Edge Technology
- Oil & Gas
- Real Estate & Construction
- Banking
We also offer team plans. Please send an email to pro.support@al-monitor.com and we'll onboard your team.
Already a Member? Sign in
Expert
