Libya’s internationally recognised Tripoli-based Government of National Accord (GNA) recently announced that its 2020 Budget would probably be slightly less than LD48 billion (US$34 billion) and about US$200 million more than last year’s budget. The government is expecting to run a 2019 deficit of around 6.9% of GDP. According to the World Bank, the government revenues — 91% of which come from the energy sector — are just enough to cover the high wage bill and subsidies. The bank optimistically noted that it expects the proceeds from the relatively recently introduced foreign exchange fee to be used to reduce public debt, although there are many competing claims to this new pool of money.

Last year it took months for the GNA to agree on the 2019 Budget, and infighting could also delay the 2020 Budget. It also assumes that consumer prices will not increase in the next year which would require additional government support. The current Tripoli war has increased prices for staple goods but, because ports are currently still operating as normal, the GNA can import what it needs to prevent shortages. There is, however, no budget planning for a long-term war despite GNA representatives admitted that the conflict, which has now lasted over six months, has already led to significant unexpected ad hoc spending.

Despite these challenges, however, there is some hope that — under the battle-tested leadership of National Oil Corporation (NOC) Chairman Mustafa Sanalla — the energy sector will be able to continue to grow despite the conflict. On 23 October the Waha Oil Company (WOC) — the joint venture between the NOC and ConocoPhillips, Hess, and Marathon which sought to sell its 16.33% share to Total earlier this year — announced that it had begun operating tests of Phase 2 of the Faregh field development project. Production capacity is currently at about 70 MMscfd but could increase by around 180 MMscfd/d plus 15,000 b/d of condensates by mid-November.

The gas production is expected to be used to increase the efficiency of the field’s crude oil production — and also supply power plants, methanol plants, and the Libyan Norwegian Fertilizer Company’s (LIFECo) plant at Marsa Brega — pending the completion of a gas pipeline by the General Company for Gas Transmission & Distribution. The latter is collaborating with Egypt’s Petrojet on the pipeline’s construction.

This excerpt is taken from Libya Politics & Security, our weekly intelligence report on Libya. Click here to receive a free sample copy.