<article><p class="lead">Libya's oil continues to flow close to capacity of around 1.2mn b/d, and state-owned oil firm NOC's chairman Farhat ben Gudara has announced a plan to boost capacity back to 2mn b/d over the next 3-5 years and hold a licensing round in 2024. Leading foreign operators canvassed by Argus say the country is moving in the right direction. But Libya is not out of the woods yet.</p><p>Twelve years after the overthrow of Muammar Gaddafi, the country remains in a transitional mess. Rival governments in the country's east and west, alongside local and foreign players, tussle for power. A fresh attempt by the UN to hold elections by the end of the year is being subverted by the leaders of the two parliaments.</p><p>Politically motivated oil and gas production shutdowns, security challenges and a general lack of maintenance over the past decade have left upstream infrastructure in disrepair. Although the Opec member's crude production has held above 1mn b/d for the past eight months, sudden and severe disruption still looms, as a result of forced facility closures or creaking infrastructure.</p><p>The question now is whether the apparent stability in the oil and gas sector will hold, and if so, whether the country can capitalise on this to attract the investment needed to bolster its production. Although many foreign oil firms have either left or downgraded their presence in Libya over the past few years, others such as France's TotalEnergies and Italy's Eni have doubled down.</p><p>Recent developments suggest positive momentum is building. Eni and NOC signed an $8bn offshore gas projects deal in January which, if they go ahead, would represent the single largest investment in Libya's upstream for more than two decades. Libya could soon see its first exploration wells drilled by an international oil company since 2014. NOC is pushing for Eni and BP to drill an onshore well by the end of the year, while Spain's Repsol is on the cusp of signing a contract to start a nine-well exploration campaign.</p><p>Repsol says the security situation around its 300,000 b/d El Sharara fields has improved. "We are getting support from the authorities. It's kind of smooth sailing today," country manager Mikel Erquiaga Aguirre says. German producer Wintershall Dea's Algeria and Libya country manager Thomas Ruttmann tells Argus that Libya offers "all sorts of opportunities" and that "things are moving in the right direction", but "it's too early to say things have significantly improved". The firm's assets in the Sirte basin and offshore face a huge maintenance backlog because of the difficult operating environment. This is true for most producers in the country.</p><h2>Race against time</h2><p class="lead">UK-based Royal United Services Institute's Libya specialist Jalel Harchaoui is sceptical of recent upstream announcements. "NOC is weaker because it has been more politicised since ben Gudara took over in July 2022. They can sign all they want. IOCs cannot inject capital into this mess." Harchaoui has a point. The current calm sits on a shaky foundation. Political actors are manoeuvring to secure a piece of the oil pie, as seen in management changes at NOC subsidiaries such as Agoco.</p><p>Most Libyan political factions pay lip service to elections, but few genuinely want them. Even if a vote was held tomorrow there is no guarantee the results would be universally accepted. And a simple change in the balance of power could easily spark fresh conflict. The longer this uncertainty prevails, the more difficult it is going to be for Libya to secure the billions of dollars it needs to kick-start a slew of on-the-shelf upstream development projects.</p><p>The country is also falling behind in the energy transition. Libya is a prolific natural gas flarer and its renewables plans are on paper only. The clock is ticking, and the world is not going to wait.</p><p class="bylines">By Aydin Calik</p><p><div class="picture"><div><span class="pic_title">Libya's seesawing crude output</span> <span class="units"></span></div><img src="https://argus-public-assets-us.s3.amazonaws.com/2023/03/24/wpap7libya'sseesawingcrudeoutput24032023101842.jpg"></div></p></article>
