Libyan Oil Concessions and the Struggle for Contractual Fairness

The complex dynamics between Libya, international oil companies and contractual challenges in the country's oil industry.

Share:

Since the fall of Muammar Gaddafi in 2011, oil-rich Libya has faced unprecedented challenges in its vital energy sector. Libya’s Minister of Oil and Gas, Mohamed Oun, in an interview with S&P Global Commodity Insights, accused some international oil companies (IOCs) of exploiting the precarious security situation and neglecting their development plans.

Accusations against International Oil Companies

These IOCs, having promised to undertake specific projects, have been lax in fulfilling their commitments, particularly with regard to exploration and seismic surveys. This situation has exacerbated the difficulties of the Libyan oil sector, which is struggling to regain its production capacity of 1.6 million barrels per day (b/d), a level it has not reached since 2011.
The summer of 2022 saw oil production fall to a two-year low of 650,000 b/d, although it has since recovered slightly. Libya, which is exempt from OPEC+ quotas, is striving to maintain production at around 1.2 million b/d. Oun stresses that IOCs who fail to meet their commitments should relinquish their concessions and hand them over to other companies.

Renegotiation of Contract Terms by TotalEnergies and ConocoPhillips

At the same time, it criticizes attempts by the ICCs, notably TotalEnergies and ConocoPhillips, to renegotiate contractual terms to increase their share of costs paid to Libya’s National Oil Corporation (NOC). This move, according to Oun, is all the more surprising given that these companies have the capacity to significantly increase their production.

The Impact of the Eni-NOC Agreement on Contractual Dynamics

The situation is further complicated by the agreement signed between Eni and the NOC to develop the A&E Offshore Structures, which, according to Oun, breaches several laws by increasing the share paid by Eni. This negotiation paved the way for other ICCs to request similar contractual modifications.
Despite these tensions, Libya plans to launch a new licensing round in 2024 to stimulate oil and gas exploration. The country, sitting on Africa’s largest oil reserves, aims to increase its oil production to 2 million b/d over the next three to five years. At the same time, gas production, currently at around 2.6 billion cubic feet per day, could be increased by tapping additional reserves.

The oil situation in Libya is marked by contractual and security challenges. Despite this, the country aspires to revitalize its oil and gas industry, by strengthening existing partnerships and attracting new investment.

Petrobras is exploring various strategies for its Polo Bahia oil hub, including potentially selling it, as current profitability is challenged by oil prices around $65 per barrel.
Brazilian producer Azevedo & Travassos will issue new shares to buy Petro-Victory and its forty-nine concessions, consolidating its onshore presence while taking on net debt of about USD39.5mn.
Major oil producers accelerate their return to the market, raising their August quotas more sharply than initially expected, prompting questions about future market balances.
Lindsey refinery could halt operations within three weeks due to limited crude oil reserves, according to a recent analysis by energy consultancy Wood Mackenzie, highlighting an immediate slowdown in production.
The flow of crude between the Hamada field and the Zawiya refinery has resumed after emergency repairs, illustrating the mounting pressure on Libya’s ageing pipeline network that threatens the stability of domestic supply.
Libreville is intensifying the promotion of deep-water blocks, still seventy-two % unexplored, to offset the two hundred thousand barrels-per-day production drop recorded last year, according to GlobalData.
The African Export-Import Bank extends the Nigerian oil company’s facility, providing room to accelerate drilling and modernisation by 2029 as international lenders scale back hydrocarbon exposure.
Petronas begins a three-well exploratory drilling campaign offshore Suriname, deploying a Noble rig after securing an environmental permit and closely collaborating with state-owned company Staatsolie.
Swiss commodities trader Glencore has initiated discussions with the British government regarding its supply contract with the Lindsey refinery, placed under insolvency this week, threatening hundreds of jobs and the UK's energy security.
Facing an under-equipped downstream sector, Mauritania partners with Sonatrach to create a joint venture aiming to structure petroleum products distribution and reduce import dependency, without yet disclosing specific investments.
Oil companies may reduce their exploration and production budgets in 2025, driven by geopolitical tensions and financial caution, according to a new report by U.S. banking group JP Morgan.
Commercial oil inventories in the United States rose unexpectedly last week, mainly driven by a sharp decline in exports and a significant increase in imports, according to the US Energy Information Administration.
TotalEnergies acquires a 25% stake in Block 53 offshore Suriname, joining APA and Petronas after an agreement with Moeve, thereby consolidating its expansion strategy in the region.
British company Prax Group has filed for insolvency, putting hundreds of jobs at its Lindsey oil site at risk, according to Sky News.
Orlen announces the definitive halt of its Russian oil purchases for the Czech Republic, marking the end of deliveries by Rosneft following the contract expiry, amid evolving logistics and diversification of regional supply sources.
Equinor and Shell launch Adura, a new joint venture consolidating their main offshore assets in the United Kingdom, aiming to secure energy supply with an expected production of over 140,000 barrels of oil equivalent per day.
Equinor announces a new oil discovery estimated at between 9 and 15 mn barrels at the Johan Castberg field in the Barents Sea, strengthening the reserve potential in Norway's northern region.
Sierra Leone relaunches an ambitious offshore exploration campaign, using a 3D seismic survey to evaluate up to 60 potential oil blocks before opening a new licensing round as early as next October.
Faced with recurrent shortages, Zambia is reorganising its fuel supply chain, notably issuing licences for operating new tanker trucks and service stations to enhance national energy security and reduce external dependence.
The closure of the Grangemouth refinery has triggered a record increase in UK oil inventories, highlighting growing dependence on imports and an expanding deficit in domestic refining capacity.