An American institute suggests Libya could partially regain investment appeal. This requires short-term steps. This is despite ongoing division and uncertainty risks.
A report from the US-based “Middle East Institute” highlighted Libya’s potential as an investment destination. It noted Libya is rich in resources. The country produces high-quality light, sweet crude oil. Investment could significantly boost current production levels. This information was reported by Al-Marsad newspaper. Al-Marsad monitored and translated key analytical insights from the report.
Difficulty Converting Potential to Successful Production Despite Corporate Interest
According to the report, a prominent fact since 2011 is the difficulty. Libya’s geological potential has been hard to convert into successful energy production. This is true even with the most committed international oil companies. However, this has not prevented renewed foreign interest. Companies are eager to participate in Libya’s first exploration bid round in over 17 years.
Political Division and Its Impact on Finance, Security, and Revenue
The report stated that political fragmentation persists without a resolution. Rival power centers control the country. These include two governments and formally unified institutions. However, these institutions are constrained by political interference. Ongoing divisions affect financial behavior. They also impact security dynamics and revenue control.
Restrictions on Oil Corporation Operations: A Political, Not Technical, Problem
The report indicated that the National Oil Corporation (NOC) in Tripoli needs reliable budgets and cash flows. It also needs institutional protection to operate as a credible counterparty. These factors are currently unavailable. The report views this as a political issue, not a technical one. It results from decisions by rival authorities. These decisions aim to maintain their influence over the primary revenue-generating institution.
Arrears, Deferred Maintenance, and Repeated Disruptions
According to the report, accumulated arrears are key indicators of deferred maintenance. They also point to a decline in service companies and reduced production. The lesson for investors is not just the potential for recovery. The sector remains vulnerable to political and military decisions. These decisions are unrelated to commercial performance. Disruptions are not fleeting. Armed groups, local communities, political factions, and institutional entities have obstructed fields. They also blocked pipelines, export terminals, fuel imports, or local distribution. This was done to extract concessions or renegotiate interests.
Gas, Infrastructure, and Economy: Critical Elements for Investment
The report emphasized that continuous gas production requires ongoing maintenance. It also needs reliable energy and sustainable funding. Authorities must invest in infrastructure. This includes electricity, water, transportation, and public services. Neglecting these areas will negatively impact foreign companies operating in Libya.
External Intervention Does Not Reduce Risks Without Internal Reform
The report noted that external political intervention from foreign governments or the United Nations cannot reduce investment risks. This is especially true without internal institutional reform. The UN-facilitated political process remains stalled. This is due to unresolved disputes between institutions. There are no indications of concrete results soon. The UN mission’s role has been limited to facilitation. It is far from managing fiscal policy or budget implementation. It also doesn’t manage exchange rates or payment discipline.
Factors Undermining Funding, and “Political Signals” May Raise Expectations
The report discussed factors making projects difficult to finance. These include weak institutions, unstable operational budgets, discretionary payments, and entrenched corruption. Deteriorating infrastructure and conditional security are also issues. Political support is unlikely to change investment behavior. This would only happen if a sponsoring state accepts the risks as a commercial guarantee.
Five Short-Term Steps to Reduce Uncertainty
The report suggested five short-term steps. These could slightly improve Libya’s investment appeal by reducing uncertainty. Foremost among them is adopting a reliable operating budget for the National Oil Corporation (NOC) in Tripoli. This also includes a transparent, time-bound plan to settle arrears owed to service companies. A regular budget would reduce service disruptions and production losses. The core problem for investors is not the debt size. It is the ability to predict and fulfill payment obligations.
He also pointed to predictable payment mechanisms for foreign contractors. These mechanisms would use dedicated guarantee structures. They would be directly funded by oil revenues. This would limit discretionary interference. It would also enable companies to assess risks more clearly.
Exchange Rate, Subsidies, and Contract Clarity
The report affirmed that exchange rate reform is “inevitable.” Officially pegging the rate while rationing dollar access diverts rents to influential importers. It entrenches corruption. It distorts prices. It drains public resources. A shift to a floating exchange rate would likely reduce speculation. He also emphasized replacing general fuel and commodity subsidies with direct cash grants to families. The report stressed the necessity of clear licenses and contracting authority. The National Oil Corporation (NOC) is the legally authorized entity. Investors need confidence that contracts will not be challenged. They must also trust that contracts will not be renegotiated with changes in political influence.
Steps That Don’t Require Elections but Need Institutional Discipline
The report concluded by noting that tangible improvements are essential. These include gas infrastructure, power generation, and basic services. These steps do not require elections or a comprehensive political settlement. Instead, they demand political restraint and institutional discipline. They also require a willingness from the most influential actors to reduce their discretionary control over revenues. This condition may be difficult to achieve without reform.