Libya’s latest licensing round draws muted response

Libya’s latest oil and gas licensing round has delivered underwhelming results, with the British journal Petroleum Economist pointing to legal disputes, fiscal pressures and structural challenges as key factors behind the muted outcome.

In a report published on Tuesday, the publication described the round as a “reality check” on conditions inside Libya and the wider global exploration market, noting that expectations of a strong international response had not materialised.

Legal uncertainty clouds investment outlook

At the heart of the issue lies a deepening legal dispute between rival authorities in eastern and western Libya over proposed amendments to the country’s oil law.

The existing framework, dating back to the era of Muammar Gaddafi, governs the terms under which international oil companies operate, including production-sharing agreements. Any changes require approval from both administrations in Tripoli and Benghazi.

While the Tripoli-based government moved ahead with the bidding process, lawmakers in Benghazi rejected the proposed amendments and passed legislation explicitly barring such changes. Authorities in the east have also refused to recognise the legitimacy of the licensing round, warning that awarded contracts could face legal challenges.

This has raised concerns among international energy firms that any agreements signed under the current process could later be revised or invalidated, undermining investment certainty.

Limited appetite for available blocks

The nature of the exploration blocks on offer also appears to have dampened interest.

The round, the first of its kind in 17 years, included 22 onshore and offshore areas. However, only five offshore blocks were ultimately awarded to international companies.

According to the report, many of the blocks were located near existing producing fields, leaving open questions about whether remaining reserves would justify the cost of development. Libya’s onshore basins, long a cornerstone of its energy sector, are among the most extensively explored in the world, reducing the likelihood of major new discoveries.

Some analysts, the publication noted, viewed the round as an attempt to market marginal or previously overlooked reserves.

Mounting fiscal pressures

Beyond legal and geological factors, Libya’s fragile financial position continues to cast a shadow over its energy ambitions.

The country remains heavily dependent on hydrocarbons, which account for around 95% of state revenues. Government spending, however, continues to exceed income, with deficits increasingly covered by drawing down foreign currency reserves.

Without a substantial increase in oil and gas output, the report warned, Libya could face growing fiscal strain in the coming years.

Compounding the challenge is the persistence of oil smuggling. United Nations experts estimate that up to 20% of Libya’s production is diverted by armed groups, depriving the state of critical revenues and weakening institutional oversight.

Chevron’s entry draws attention

Despite the subdued outcome, the participation of Chevron was seen as a notable development.

The US energy giant was among five companies awarded exploration opportunities, in what the report described as a “surprise” move.

However, its involvement may carry wider geopolitical implications. Chevron has previously secured offshore gas exploration rights from Greece in areas near Crete that are also claimed by Libya.

The publication suggested that the company’s engagement in Libya’s licensing round could help ease tensions linked to its activities in the disputed eastern Mediterranean waters.

Production targets face uncertainty

Libya has set an ambitious goal of raising oil output from around 1.4 million barrels per day to 2 million by 2028. However, the outcome of the latest licensing round highlights the obstacles facing that target.

Ongoing political divisions, legal ambiguity and structural constraints continue to weigh on investor confidence, raising questions over the pace at which Libya can expand its production capacity.

For now, the report concludes, the country’s energy sector remains caught between significant potential and persistent uncertainty.