Libya: oil minister returns after two-month suspension

Mohamed Aoun, Libya’s oil minister, returns to his post after a two-month suspension by the ACA (Administrative Control Agency) for a “legal violation”. According to a statement on the Ministry of Oil’s Facebook page, Aoun is returning to his duties and working “at his office in the Ministry”. The ACA, responsible for overseeing the government’s performance, completed its investigation on May 12 and lifted the preventive suspension. The Minister’s representatives declined to comment further on his return.

Political and economic context

Since the fall of Moammar Gaddafi in 2011, Libya has been plunged into chaos, with rival governments in the east and west. Aoun, appointed in 2021, is part of the internationally-recognized Tripoli-based Government of National Unity (GNU), although his relations with Prime Minister Abdul Hamid al-Dbeiba are strained. Despite this instability, oil production has stabilized in recent years, reaching 1.17 million barrels per day (b/d) in April, the highest level since February 2023, according to the Platts OPEC Survey from S&P Global Commodity Insights.

Disturbances and stability

Libya’s political actors retain the ability to disrupt oil flows. In 2022, the warlord of the east, Khalifa Haftar, reduced production to 650,000 b/d with a blockade imposed by his Libyan National Army. However, in recent months, analysts have observed a reorientation of Libyan politics around Dbeiba, Haftar and Farhat Bengdara, Chairman of the NOC (National Oil Corporation), which could maintain the country’s oil production and usher in a period of economic and political stability, albeit without achieving complete reunification.

Corruption and internal conflicts

Libya’s oil sector is still plagued by accusations of corruption and fuel smuggling, while several political processes aimed at organizing long-delayed elections are opening up new fronts for struggles between powerful players. Sources tell Commodity Insights that Aoun’s suspension may be linked to his opposition to agreements with international oil companies, including the key NC-7 project.

International projects and reviews

The NC-7 project, which holds 2.7 Tcf of gas and an unspecified quantity of oil, is the subject of discussions between the NOC and Eni, TotalEnergies, ADNOC and the Turkish company TEC. Aoun criticizes this agreement as well as the discussions on the Waha field with TotalEnergies and ConocoPhillips, arguing that the terms are too preferential and accusing the NOC of exceeding its mandate. Conflicts between the main players in the oil sector have made investors nervous in recent months. Aoun was replaced by his deputy, Khalifa Abdul Sadiq, who analysts believe is capable of unlocking key agreements with international companies.

Reactions and outlook

A well-placed observer of the security sector says he doubts that Aoun can now achieve much beyond the usual criticism, adding that relations between Aoun and Dbeiba have not improved. Libya’s light, sweet crude oil is popular with European refiners. As production and exports rise in recent months, competitive Libyan barrels are outperforming comparable crudes, including those from the USA and Nigeria, on the thirsty Mediterranean market.
The return of Mohamed Aoun as Libya’s oil minister underlines the continuing political turbulence in Libya. While relations between the main players remain tense, the stability of the oil sector will depend on the country’s ability to overcome internal conflicts and maintain steady production despite political challenges.