Since Libya was last featured in the pages of The African Business Journal it has certainly treaded into the spotlight. While the past decades have seen the country move in and out of international favour, it has now fallen to irreparable levels with its first civil war in 40 years, since Colonel Muammar Gaddafi deposed King Idris in a coup d’état in 1969. Its previous tensions with the Western world stemmed from oil, and some say its current internal troubles could be resolved through the production and sale of this leading reserve. Could oil spell an economical way out of the ongoing conflict?

The international response

The civil war is being fought between those seeking to depose Gaddafi and hold democratic elections, and pro-Gaddafi forces. It began as a series of peaceful protests on 15 February 2011, which Gaddafi’s security services attempted to repress, but within a week the uprising had spread across the country and Gaddafi was struggling to retain control. It has escalated into armed conflict with rebels establishing a coalition called the Interim Transitional National Council (ITNC), based in Benghazi.

In a statement the ITNC said: “In this important historical juncture which Libya is passing through right now, we find ourselves at a turning point with only two solutions. Either we achieve freedom and race to catch up with humanity and world developments, or we are shackled and enslaved under the feet of the tyrant Gaddafi where we shall live in the midst of history.” Its mandate is to “liberate Libya from the hands of the tyrant Gaddafi who made lawful to himself the exploitation of his people and the wealth of this country.”

Much of the wealth and income of this North African country comes from its oil production. Petroleum revenues contribute up to 58 per cent of Libya’s GDP. Its oil wealth being spread over a small population has allowed for a relatively high living standard compared to neighbouring states.

Gaddafi himself has amassed a vast personal fortune during his 42-year rule. But rebel-held oil, which could be used to fund weapons and food supplies, is currently inaccessible.

The Libyan rebels’ top oil official, Wahid Bughaigis, said on April 24 that oil production in Libya’s rebel-held east would not resume for at least four weeks.

Bughaigis said damage to an oil field in Misla, which is also responsible for processing oil from other sites in the southeast, has still not been repaired. “We are still unable to produce oil because the oil field in Misla, which was been attacked by Gaddafi forces several times since February, has been so extensive,” he added. “Until it is repaired we will not be able to produce nor ship any more oil.”

The ITNC has managed to export one shipment of oil through a deal with Qatar, which earned them $129 million. But with an ongoing need to buy weapons and ensure food supplies to the east, Bughaigis said the profit would not go far. “It will be at least four weeks, and I am hesitant about putting a time stamp on it, before we are able to think about making another shipment,” he said.

Income from crude oil could allow the ITNC to reinforce its army and step up its fight against Gaddafi. According to ITNC Vice-President Abdul Hafiz Ghoga, having enough money to buy weapons is crucial to the ongoing struggle. “So long as there are not enough arms arriving, we will have to count on an internal collapse of the Gaddafi regime,” he said. “That is something that is increasingly becoming a possibility. Protests against the regime in Tripoli were covered up.

Instead the regime spread rumours that the head of the ITNC had been killed. This shows that they are weakening both politically and militarily on a daily basis.”

But what is it going to take to successfully bring rebel-held reserves back to global markets? Legally the oil still belongs to Gaddafi so the key question is how it can be sold into global markets without infringing on economic sanctions imposed on Libya. In May, foreign ministers met on May 6 in Italy to decide a multi-billion dollar aid package for Libyan rebels.

Both William Hague, British foreign secretary and first Secretary of State, and Hillary Clinton, U.S. Secretary of State, will be among the 22 representatives looking for at least $1.5 billion to aid the rebels. Officials from the ITNC will also attend the summit. The main topic will be funding for the rebels and how to best release the frozen Libyan assets–namely oil–which could be sold to raise money towards aiding the rebels.

“We have made it abundantly clear that the best way to protect civilians is for Gaddafi to cease his ruthless, brutal attack on civilians from the west to the east, to withdraw from the cities that he is sieging and attacking, and to leave power,” said secretary Clinton. She also said the meeting will seek “the most effective ways to deliver financial assistance” for Libya and other support to the rebels.

The U.S. secretary of state will be formally presenting America’s pledge to provide $25 million in surplus, non-lethal goods and commodities. Libyan rebel spokesperson Mahmoud Shamam said the money would be used for medical and food supplies, hospitals and electricity. He also suggested that there would be discussion about weapons for the rebels as they are “hungry for basic arms.”

Liquid gold’s role in Libya

It has been 60 years since Libya declared independence. Five years after that the first concessions of oil exploration were granted to foreign companies, and in 1959 the first successful drilling was reported. In 1961 Libya became an oil exporter with the completion of a 167 kilometre pipeline.

Overnight Libya went from being one of the poorest nations in the world to one of the richest but equity was lacking and popular resentment grew along with oil exports. In 1969 a small group of young military officers staged a successful coup d’état and deposed King Idris who had been the leader since independence. Gaddafi became the country’s ruler at age 28.

Libya joined OPEC right after it was founded, and played a pivotal role in the 1973 oil embargo to the United Kingdom. The next three decades were marked by tense relations with Western countries and oil production dropped even further to 1.5 million barrels per day (Mb/d). Libya grew into a pariah to the Western world due to its performance during the embargo, its support for Arab unity, and its opposition to Western interests in Islamic states.

Over the next 20 years Gaddafi was implicated in both the 1987 destruction of a French airliner and Pan Am Flight 103’s explosion over the Scottish town of Lockerbie. These actions resulted in a set of sanctions imposed against Libya in 1992 by the United Nations.

Nonetheless, oil production grew to 1.4 Mb/d and remained there until the turn of the century. By the end of 2003, the UN requirements had been fulfilled and, the next year, the UN lifted all sanctions against Libya. With these changes, relations with international oil companies began strengthening again. The country’s oil production has steadily increased since sanctions were lifted and is now approaching 1.9 Mb/d.

Libya is now a mature oil-producing region. In spite of political turmoil and difficult foreign relations, the country’s oil consumption per capita has steadily risen around 2.5 per cent per annum. Using a consumption-per-capita forecast of two per cent per annum, and the UN’s population growth projections, Libya’s oil consumption is set to increase two-fold during the next two decades.

There is much irony in Libya’s history as an oil producer. If Gaddafi had not reached power, the country probably would have extracted the majority of its oil during times of cheap energy, as happened in most of Europe. While the country was forced into isolation for decades, Libya now reaches the 21st century with half of its oil reserves intact, but under the repressive ownership of Gaddafi. In the midst of this civil war, can foreign intervention open up the rebels’ access to the oil, and return Libya into international favour?

Impacting supply

The Libyan crisis has almost shut down output by what used to be Africa’s third-largest producer. Analysts said the loss of its crude oil is likely to keep the heat under prices trading at $124 a barrel and near the highest it has been since 2008. Paul Tossetti, Senior Energy Advisor at PFC Energy, said, “It looks like Libya’s going to stay shut for the long term and I think there will be a geo-political risk premium for the rest of the year, supporting the price.”

A Reuters survey in early May found that OPEC output fell to a 23-month low in April as extra oil from Saudi Arabia and Nigeria did not make up for supplies lost due to fighting in Libya and oilfield maintenance in Angola. Supply from all 12 members of OPEC averaged 28.42 Mb/d, down from a revised 28.48 Mb/d in March, OPEC officials and analysts found.

How has unrest in Libya affected other key oil-producing nations? Top exporter Saudi Arabia raised supply in April from a much lower figure in March than initially estimated. The kingdom cut production in March due to oversupply, said Saudi oil minister Ali al-Naimi on April 17. OPEC output in April was the lowest monthly total since May 2009, soon after the organization had implemented a record output cut to prop up prices, according to the Reuters survey. Angolan supply declined by the most because of field maintenance and, according to industry sources, declining output at some of the country’s older fields. Export schedules suggest little change in output for May.

Libya’s production posted a further decline of 70,000 barrels per day (b/d) in April to average 250,000 b/d. Until violence broke out earlier this year, output had been running near 1.6 Mb/d. Of the countries with higher output, Saudi Arabia boosted supply by 200,000 b/d from 8.3 Mb/d in March, much lower than the nine Mb/d initially estimated by Reuters for March. Initial estimates suggest a decline of 100,000 b/d in the United Arab Emirates and stable output in Kuwait. Nigeria shipped more barrels in April because of a reduced impact of field maintenance on output.

Despite the civil war’s impact on neighbouring oil producers, OPEC has so far decided against taking any formal action on raising its output and it is not scheduled to meet until June. OPEC does not provide timely official production figures, so the oil industry relies on supply estimates from news agencies, consulting firms and organizations such as the International Energy Agency.

A Paris Summit for the support of the Libyan people in March released the following statement: “Since February 15 this year, the Libyan people have been peacefully expressing the rejection of their leaders and their aspiration for change. In the face of these legitimate requests coming from all over the country, the Libyan regime has carried out a growing brutal crackdown, using weapons of war against its own people and perpetrating against them grave and massive violations of humanitarian law.

“This situation is intolerable. We express our satisfaction after the adoption of the United Nations Security Council (UNSC) resolution 1973, which demands an immediate and complete ceasefire, authorizes the taking of all necessary measures to protect civilians against attacks and establishes a no-fly zone over Libya. Finally, it strengthened and clarified the arms embargo vis-a-vis the Libyan regime and the rules applicable to the Libyan asset freeze, in particular on the National Oil Company.

“We pay tribute to the courageous action of the INTC and all the Libyans in positions of responsibility who have courageously disassociated themselves from the Libyan regime and given the INTC their support. Our commitment is for the long term: we will not let Gaddafi and his regime go on defying the will of the international community and scorning that of his people. We will continue our aid to the Libyans so that they can rebuild their country, fully respecting Libya’s sovereignty and territorial integrity.”

It is clear that international opinion is on the right side as foreign leaders gather to determine the next step in bringing aid to Libyan rebels. The three-month civil war has had a debilitating affect on oil production and output in many neighbouring states, and access to Libyan oil is one key measure that can equip the rebels with the money and arms they need to put an end to the conflict. Latest reports as of May 16 suggest that Shukri Ghanem, the Libyan minister of oil and head of the country’s national oil company, may have defected to Tunisia—news yet to be confirmed by government. The impending summit will determine the likelihood of aid arriving in the war-torn country, rumour and supposition surrounding the state of the government today, and Libya’s much-needed return to a position among global oil markets and foreign diplomacy.


Asime Nyide, known as DneinNuqer, is the insightful mind steering the helm at With a keen eye for business trends and a commitment to delivering cutting-edge insights, Asime curates a dynamic space where industry enthusiasts and entrepreneurs alike converge. Unveiling the latest market developments, strategic analyses, and thought-provoking perspectives, Asime Nyide fosters a community of forward-thinkers at, making it a go-to resource for those navigating the ever-evolving landscape of business. E-mail / Instagram