Libya - introduction
Libya is, perhaps inevitably, a slightly unusual case when it comes to local
content. Although many other oil-producing states are ruled by idiosyncratic
leaders, few have been so totally dominated by such a unique individual as the
Leader and Guide of the Revolution, Colonel Muammar Qadhafi.
Since Libya renounced its WMB programme in December of 2003 and international
sanctions were lifted, huge strides have been taken to open the country up to
, In particular, Dr Shukri Ghanem's tenure at the helm of the National Oil
Company (NOC) has seen a welcoming attitude towards the participation of IOCs
Libya's oil and gas industry. So far it has held four initially successful EPSA
licensing rounds which have attracted the world's oil industry and have lead to
Libya being consistently voted as one of the top exploration destinations for
Despite succeeding in attracting so many new entrants, the benefits of Libya's
expanded oil sector have not yet trickled down very far to the majority of the
population. At the same time, increased oil income does not necessarily
into more jobs for Libya's burgeoning (and traditionally under-employed) army
school-leavers. Therefore, in a move partially following Nigeria and Venezuela,
Libya has adopted more stringent local content requirements in an attempt to
more of the benefits of the oil sector accruing to the indigenous population.
A law passed in 2006 now requires foreign investors to establish joint ventures
with local companies, who must take at least 35 per cent. This law will also
undoubtedly affect established operators when their contracts come up for
in the next few years.
Despite this, however, so far the legislative framework remains patchy, and
informal pressures on the part of NOC tend to exceed the legal requirements.
have, as a rule, recognised which way the wind is blowing and have made efforts
meet and exceed NOC's expectations. In part this has been out of short-term
self-interest, but building up local capacity has also been recognised as a
long-term investment. "If we are training future members of the NOC and the Ministry, that can only be
good for our long term relationship with the country," one IOC official told LC-O.
Libya 's determination to press on with local content regulations has,
nonetheless, rattled investors. The truth is that, for all its progress towards
respectability since international sanctions were lifted, it remains erratic.
Qadhafi's directives - such as a March 2008 pledge to abolish almost all the
government ministries, which he claimed had failed Libyans - continue to
international investors. At the same time the even more radical plan to give
Libyan people - who have been used to a cradle to grave welfare system since
a proportion of the oil revenues but force them to pay for virtually all the
services that the government has always provided, has so far failed to
Theoretically the economy remains statist and under popular control while, in
reality, being controlled with virtually no exception, by the Qadhafi family.
Given the overwhelming importance of oil revenues to Libya, and particularly
the current global economic meltdown and at a time when oil prices are low it
highly unlikely that the regime would expropriating international assets for
fear of an exodus of IOCs.
The regime's insistence on local content at the expense of efficacy has also
posed problems. Managers have questioned the system's insistence that certain
individuals are hired or certain suppliers are contracted, even when these are
necessarily the strongest or most committed candidates. Efficiency suffers as
companies only train staff to the extent that this satisfies NOC's leadership.
problem is likely to grow as Libya attempts to slash its bloated public sector:
the overwhelming dominance of the State means that the nascent Libyan private
sector, as well as foreign investors, could be expected to absorb many of those
who lose their public sector sinecures, even when these employees may not be
particularly desirable. IOC fear, with good reason, that they may be forced to
much of the burden.
The local content situation in Libya is likely to become considerably stricter
in the next few years, as the government takes advantage of international
interest in the country's resources to maximise national control. The February
requirement to establish local operations to qualify for engineering contracts,
which has provoked consternation amongst IOCs, is probably the shape of things
Petroleum Law of Libya no.10 - Reorganisation of the NOC 1979
Rules for Recruitment of non-Libyan labour
UKTI: Doing Business in Libya's Oil & Gas Sector
Note on rules affecting foreign company branches in Libya
Examples of Invitation to Tender
Waha Oil Company
Libyan Petroleum Institute
National Oil Company
Menas Libya Focus
Menas Libya Politics & Security