A new Libyan Government has been sworn in for the first time in a decade, since the fall of Muammar Gaddafi in 2011. This is a positive sign for a nation that has struggled for so long, and with the rise of a new nation comes a rise in industry, and particularly in this case, the rise of oil.
At the end of Gaddafi’s reign Libya was exporting 1.8 million barrels of oil per day (b/d). It was a major player in the Organisation of Petroleum Exporting Countries (OPEC) and over 50% of GDP came from the petroleum sector. Now, it plans to ramp up production, and eventually overtake its historic records.
In the last 6 months, oil production has surged from less than 100,000 b/d to 1.3 million b/d. This has brought Libya back into the limelight, as it once again becomes one of OPEC’s top 10 producers. This increase has come under the chairman of Libya’s National Oil Corporation (NOC), Mustafa Sanalla.
Sanalla has served as chairman since 2014, and has succeeded in keeping NOC out of political involvement in that time. Now he has set out new production targets, hoping to produce 1.45 million b/d by the end of the year, 1.6 million the year after that, and 2.1 million in another two years.
This production spike will certainly be on the minds of its OPEC partners, who plan to keep production low this year, to ensure higher prices. Libya has long been exempt from production limits, owing to its diminutive exports and incapacity to increase volume. Now it is returning to its position as a major oil producer, and it will almost certainly become subject to the same restrictions imposed upon other members.
This whole scenario is contingent on Libya’s maintained stability. Sanalla said that the goals are reliant on a bump in funding from the government, to repair corroded equipment and ageing facilities, along with increased security measures at key oil stations. There will also be elections in December which could stir up political rivalries, and could be a threat to NOC’s long term goals. All of this combined with intermittent terrorist and militant forces attacking oil facilities, means that nothing is certain about Libya’s production targets.
The market seems to be paying attention regardless, with Brent Crude, the international benchmark, down almost 7% last week, following the government’s inauguration. This is the biggest drop since October 2020, and Libya’s announcement is undoubtedly a contributing factor. Oil prices have soared in recent months, following a cut of 1 million b/d by Saudi Arabia, among other contributing factors.
Other OPEC nations such as Russia and Kazakhstan have sought to increase production, predicting increasing international demand coming out of the pandemic. Libya will be similarly keen to continue increasing production, as it is severely in need of a stable cash flow to rebuild itself after a decade of unrest, and the petroleum industry still being over 50% of GDP is a huge opportunity.
Libya has a chance here to regain its position as a major world oil producer, but it faces a precarious journey ahead. It must contend with OPEC pressures to reduce production, as well as internal unrest, and a world heading away from fossil fuels. For a country so dependent on petroleum products, it seems like the obvious route to take, but Libya must look more than 4 years into the future. It is a country reliant on one industry, but Libyan oil cannot last forever.