Libya Oil Output Hits 12-Year High; Income Trickle In| Global Finance Magazine

Central bank constraints and high import costs are dampening the impact of the $4B windfall.

War-torn Libya is pumping oil at its fastest pace in more than a decade, averaging 1.4 million barrels a day in April, according to National Oil Corp. operating data.

Still, energy refining, distribution networks, and subsidy-backed imports remain plagued by institutional fragmentation since the 2011 conflict, when production plummeted from 1.5 million barrels a day to near-zero levels during the civil war.

The imbalance reflects Libya's fragmented system, where crude oil exports continue but energy refining, distribution networks, and subsidized imports remain hampered by years of institutional disruption since the 2011 uprising and ouster of dictator Muammar Gaddafi, where production has plummeted.

Tracking Libya's Hydrocarbon Windfall

The state-run NOC reported $2.82 billion in oil revenue in April, followed by nearly $4 billion in May, the highest monthly take in more than 10 years, according to local energy reports citing official data. Crude flows through terminals in Es Sider, Ras Lanuf, and Zawiya to Mediterranean markets, where it is priced against Brent-linked benchmarks.

However, translating strong productivity and rising profits into direct benefits for the government and its people remains a challenge.

The increase in May coincided with a large increase in gasoline purchases; NOC Chairman Masoud Suleman confirmed the receipt of the contract for 17 fuel tanks, which is the highest monthly purchase in the history of Libya. Even as import activity is increasing, several cities in western Libya have reported fuel shortages and long lines at filling stations, reflecting the continued deterioration of domestic distribution.

Currency conversion of oil revenues is structurally uneven. In April, only 1.91 billion dollars of 2.82 billion dollars in revenue reached the Central Bank of Libya after the deduction of fuel and the payment of expenses using the Libyan Foreign Bank method. That left about $910 million stuck in upstream settlements awaiting final transfer to the independent liquidity system.

On June 3, the central bank launched a program to allocate 3.5 billion foreign funds to cover letters of credit (LOCs), international transfers, and foreign exchange needs, according to Libyan financial disclosures, amid persistent pressure on foreign financing for food, fuel, and industry.

Central Bank at Center of Fiscal Fault Line

The central bank sits at the center of this financial cycle. It is the only official recipient of hydrocarbon revenues and converts the revenues into domestic currency for wages, imports, and foreign exchange dividends, making it a clearinghouse for the national economy.

That role has repeatedly placed him at the center of political upheaval. In August last year, a dispute over central bank leadership caused a production shutdown in the eastern part of the country that quickly reduced output from nearly 959,000 barrels a day to 591,000, according to NOC data. The United Nations Support Mission in Libya has warned that the disruption of the central bank's withdrawal operations will freeze LOCs and salary payments, given that hydrocarbons account for more than 90% of foreign earnings.

The basic political structure remains divided between the UN-backed Government of National Unity in Tripoli and the Government of National Stability based in Benghazi and Tobruk in the east; UN mediation continues, but national elections are still on hold. An unusual change occurred on April 11, however, when the opposing legislative bodies in the east and west signed a historic agreement to consolidate public spending, creating the first unified budget framework in Libya since 2013.

Foreign Ministers Return As Political Crisis Continues