Libya Oil Once Again Held Hostage by Blockades, Power Plays

The closure of the Sharara oil field, Libya's largest, represents a significant obstacle to Tripoli's plans to restore and even surpass Gaddafi-era crude production levels, when the country reached 1,6 million barrels a day.

The agreements with the large oil companies and the new wells to be activated, which should bring production to two million barrels per day as announced by the president of the National Oil Corporation (Noc), Farhat Bengdara, clash with the reality of a still unstable political framework. The latest blockade of oil production, one of many that have marked Libya's recent history, risks worsening internal insecurity, slowing down GDP growth and negatively influencing international oil prices, reducing the country's fiscal space.

Despite these difficulties, Libya had once again become the main supplier of crude oil to Italy, according to data from the Energy Union for Mobility (Unem). In the first quarter of 2024, out of a total of approximately 14,5 million tons of imported crude oil (-3,3% compared to the previous year), 38,5% came from Africa, with Libya alone it covered 21% of Italian imports, surpassing Kazakhstan and Azerbaijan, each with a 15% share. Furthermore, there is growing Chinese interest in Libyan crude oil, known for its low sulfur content. In 2023, China International United Petroleum and Chemicals Company (Unipec), a subsidiary of Sinopec Corporation, was the largest buyer of Libyan crude oil, with a market share of 11%.

The Noc has launched an appeal to the large international companies present in Libya, such as Eni and Total, to support the accelerated development plan, which aims to bring daily production from 1,2 to 2 million barrels by 2025, two years earlier compared to initial forecasts. The Libyan economy is largely dependent on the oil and gas sector, which accounts for 97% of exports, more than 90% of tax revenues and 68% of GDP. In 2023, thanks to the resumption of oil production and improved security, Libya's GDP grew by 12,6%. Between 2004 and 2022, the industrial sector, driven by oil and gas, contributed 61,7% to GDP, while the manufacturing sector and agriculture had a much smaller weight, at 4% respectively. and 2,8%. The lack of economic diversification is highlighted by the fact that, in 2022, the service sector employed 70% of the workforce, while agriculture employed 9,2%, despite their limited contribution to production.

According to data from the Libyan Central Bank (Bcl), total public spending in the first seven months of 2024 reached around 57,56 billion dinars (around 11 billion euros), while revenues amounted to 61,15 billion dinars (approximately 11,69 billion euros). Most of the expenses were allocated to salaries (36,5 billion dinars, around 7 billion euros), followed by administrative expenses (4 billion dinars, 764 million euros), development (160 million dinars, 30,59, 9,4 million euros) and support (1,8 billion dinars, XNUMX billion euros). No funds were allocated to the emergency chapter.

The disbursements for the financial agreements of the Noc since the beginning of the year amount to 5 billion dinars (950 million euros), while the General Electricity Company of Libya (Gecol) has received 2,5 billion dinars (478 million euros ). The Bcl specified that the funds allocated to the Noc are part of the exceptional budget planned for 2023, as are those for Gecol. Bcl's financial statements show that the main revenues derive from: oil sales (51 billion dinars, approximately 9,75 billion euros), oil royalties (8,8 billion dinars, approximately 1,68 billion euros) and customs (395 million dinars, approximately 75,23 million euros).

Many are unaware that the former Jamahiriya of Muammar Gaddafi it is, at least theoretically, an extremely rich country. According to the World Bank, in 2023 Libya's total reserves, including those in gold and US currency, exceeded 92 billion dollars, a figure higher than that of neighboring Algeria, now the main gas supplier to Italy and Europe , with reserves estimated at US$81 billion. Furthermore, the value of the assets of the Libyan Investment Authority (LIA), the large sovereign wealth fund frozen by the UN, was estimated at US$67 billion in 2016, although this figure may have decreased over time. However, without oil, the country, a member of OPEC+, would lose its main engine of economic growth. Paradoxically, it is precisely oil that acts as an instrument of pressure, a battlefield for internal political struggles, social demands and, ultimately, the theater of the great game of foreign powers, all competing for control of the largest oil reserves in the world. 'Africa.