By Mahmud Sawan*
With abundant resources and substantial economic potential, Libya's petroleum industry is a notable contributor to the global energy market. As of November 2023, Libya has the largest oil reserves in Africa, and stands as the leading oil producer in the continent.
In recent years, there has been a growing interest among various stakeholders in understanding the structural landscape of Libya's petroleum sector and the key state-affiliated entities operating in this sector. This post seeks to address this topic by exploring the key entities in Libya's petroleum sector, their structures and powers.
At present, there are four major entities in Libya’s petroleum industry with varying legal powers and structures. These key entities include the National Oil Corporation, the Ministry of Oil & Gas, the Council of Ministers, and the recently reactivated Supreme Council of Energy Affairs. Before exploring these entities, it may be important to familiarise ourselves with the general legal framework that governs Libya's petroleum industry.
Legal Background
The legal framework governing the Libyan petroleum industry is primarily contained in Petroleum Law No 25 of 1955, its regulations and subsequent amendments (“Petroleum Law”). The Petroleum Law contains the general rules that govern activities related to the exploration, extraction, and development of petroleum resources in Libya.
The Petroleum Law addresses various critical aspects, including concession allocation, taxation, revenue distribution and contractual arrangements. Over time, amendments have been made to align the Petroleum Law with changing industry dynamics.
Other important legal provisions are contained in other legislations which include:
Law No 24 of 1970 on the Establishment of the National Oil Corporation (“Law No 24”)
Decree No 10 of 1979 on the Reorganisation of the National Oil Corporation (“Decree No 10”)
With respect to petroleum agreements, Libya has used various contractual arrangements in its upstream petroleum industry. This includes concession agreements as outlined in the Petroleum Law, joint venture agreements and participation agreements. However, the most prevalent contractual arrangement in Libya's upstream sector is the Exploration and Production Sharing Agreements (“EPSAs”), consisting of four distinct generations
The National Oil Corporation ("NOC"):
Until the late 1960s, the Libyan petroleum industry was widely dominated by IOCs with limited participatory role for
the Libyan state. However, a shift occurred in 1968 with the establishment of the General Libyan Petroleum Company (“Liptco”) by Law 13 of 1968 which was authorised to participate in the exploitation and development of Libya’s petroleum resources.
The legal structure of Liptco and its limited powers did not align with the objectives of the then newly formed revolutionary government of 1969, which sought to exert greater control over the petroleum industry. Consequently, in the early 1970s, Law No. 24 was promulgated to create the NOC, effectively replacing Liptco and inheriting all of its assets and liabilities. The NOC was later reorganised by Decree No.10.
The establishment of the NOC at that juncture was driven by a broader objective to enable Libya to actively participate in the operational aspects of its petroleum industry. Given this objective, and as per Law No 24 and Decree No 10, the NOC is vested with a comprehensive operational mandate covering oil and gas exploration, production, and marketing, both within and beyond the borders of Libya. The NOC is empowered to pursue these activities through its fully-owned subsidiaries or in partnership with other domestic companies and IOCs.
The NOC enjoys a distinct legal personality, setting it apart from other state entities. However, while the NOC has an independent financial patrimony by law, its budget is allocated and approved by the Council of Ministers.
The NOC is governed by a Board of Directors which is appointed by the Council of Ministers. This Board of Directors consists of: (i) its chairman; (ii) the Undersecretary/Deputy of the Ministry of Petroleum; and (iii) three experts in the field of petroleum (Decree No. 10). The Chairman of the NOC’s Board of Directors also holds the position of the NOC’s General Manager (Decree No. 10).
In addition to its operational mandate, the NOC is also empowered to exercise regulatory and supervisory authority over its fully-owned enterprises, as well as other participants in the Libyan petroleum industry. For example, Article 1(2) of Decree No. 10 provides that the NOC, in pursuing its purposes, shall “Follow the best practices to preserve the oil wealth, utilise it effectively, and oversee the activities of oil companies and affiliated companies to achieve this goal”.
However, the NOC’s supervisory and regulatory powers are in turn subject to comprehensive oversight by the Ministry of Petroleum and the Council of Ministers.
The Ministry of Petroleum
The Ministry of Petroleum came into existence in 1963, replacing the previous Petroleum Commission under Law No. 6 of 1963, which amended the Petroleum Law.
Over the years, the Ministry of Petroleum has undergone various structural and organisational changes. As a result, this Ministry has been given different names, including the Ministry of Oil & Gas, Ministry of Energy, and Ministry of Petroleum Affairs. At times, the Ministry of Petroleum ceased to exist, with its responsibilities divided between the NOC and the Council of Ministers.
As of the time of this writing, Libya has a Ministry of Petroleum known as the Ministry of Oil & Gas (“MOG”). The MOG was established as part of the Government of National Unity which assumed power in 2021. The MOG’s organisational structure was then defined by Decree No. 232 of 2021.
Applicable laws grant the MOG regulatory and supervisory powers over the NOC and other participants in the Libyan petroleum industry. The MOG’s authority over the NOC includes powers such as appointing the NOC's auditors, preparing an annual report on the NOC's operations for submission to the Council of Ministers, and having the Deputy/Undersecretary of the MOG as a member of the NOC's Board of Directors (Decree No. 10). The Minister of Oil & Gas can also call for meetings of the NOC's Board of Directors and chair such meetings when convened based on this call (Decree No. 10).
Furthermore, certain resolutions issued by the NOC's Board of Directors require the approval of the Minister of Oil and Gas to become effective. For instance, under Law No 24 and Decree No 10, the approval of the Minister of Oil & Gas must be obtained if the NOC’s Board of Directors issues a resolution related to any of the following:
The adoption articles of association for any of the NOC’s subsidiaries;
The appointment of boards of directors or general managers for any of the NOC’s subsidiaries.
Overseeing the activities of the NOC's subsidiaries, including the approval of their budgetary projections and final financial statements.
Authorising the use of allocations or reserves by any of the NOC's subsidiaries for purposes other than those originally designated in their budgets.
The appointment of the NOC's representatives in companies in which the NOC holds a shareholding.
Under Decree No. 232 of 2021, the MOG consists of several departments, such as the Technical Affairs Department, Inspection & Measurement Department, and Corporate Accounting Department. Through its Technical Affairs Department, the MOG monitors and assesses the NOC's performance of technical tasks to ensure its compliance with technical and environmental standards as outlined in applicable laws.
The MOG's Inspection & Measurement Department has powers such as adopting the technical specifications for oil and gas measurement systems, supervising oil and gas measurement, transportation, storage, and export operations, as well as supervising oil exports.
Through its Corporate Accounting Department, the MOG has powers to audit the accounts of oil companies operating in Libya as set out in the Petroleum Law. It also exercises financial oversight and inspects companies holding concession contracts to ensure adherence to proper accounting systems and compliance with their obligations under the Petroleum Law. Lastly, the MOG's Corporate Accounting Department is empowered to collect all fees, rents, royalties, income taxes, and any other taxes stipulated under the Petroleum Law.
The Council of Ministers
Previously known as the General People's Committee, the Council of Ministers is the highest body within the executive authority in Libya. This Council generally consists of the Prime Minister and all other ministers.
The Council of Ministers holds a central role in the decision-making process within the Libyan petroleum industry. This role enables the Council of Ministers to exercise supervisory powers over the NOC and the whole Libyan petroleum industry.
Under Decree No. 10, a primary function of the Council of Ministers within the petroleum industry is to approve certain significant resolutions made by the NOC’s Board of Directors. For instance, the NOC’s Board of Directors must obtain the approval of the Council of Ministers, if it issues any resolution related to the following:
Establishing the NOC's objectives in connection with its operations, investment, and production programs.
Formulating the NOC's estimated and general budget, as well as its final financial statements.
Enacting any administrative, financial, and technical regulations for the NOC.
Entering into service contracts or other agreements for the exploitation of petroleum resources in Libya.
Establishing new companies or acquiring shares in existing ones.
Merging any of the NOC's subsidiaries.
Dissolving or liquidating any of the NOC's fully-owned companies.
However, the most controversial power held by the Council of Ministers is provided in Article 6 of Decree No 10, which states that "[The Council of Ministers] shall be responsible for approving agreements and contracts concluded in the petroleum sector between the National Oil Corporation and foreign oil companies, as well as amending agreements and contracts concluded in this field, without being bound by the provisions of the applicable laws."
If Article 6 above is interpreted literally, this means that the Council of Ministers may potentially circumvent any applicable petroleum laws and regulations when exercising its power to approve and modify agreements between the NOC and IOCs.
The Council of Ministers also has conflict resolution power to address disputes that may arise between the NOC and MOG. For example, if there is a conflict between the NOC’s Board of Directors and the Minister of Oil & Gas regarding a specific resolution issued by the first, this matter will be referred to the Council of Ministers for resolution.
The Supreme Council of Energy Affairs
The Supreme Council for Energy Affairs (the “Supreme Council”) is relatively a new body in the Libyan petroleum industry. It was first established in 2009 by Decree No 406 of 2009 on the Establishment and Organisation of the Supreme Council for Energy Affairs. However, in the years that followed 2011, the Supreme Council had practically ceased to exist until 2022. By virtue of Decree No. 790 of 2022, the Supreme Council has been reactivated but with a new structure and organisation.
The Supreme Council primarily functions as a central policy-making authority. It has a focus on the development of national energy policies, the proposal of energy plans and programmes, and the evaluation of the performance of these initiatives. The Supreme Council’s jurisdiction covers the conservation and efficient utilisation of energy resources, spanning oil and gas, petrochemicals, atomic energy, renewable energy, and electricity.
Under Decree No. 790 of 2022, the Supreme Council is composed of several key government officials, including:
The Prime Minister (as the Chairman);
The Head of the Audit Bureau (as a monitoring member);
The Governor of the Central Bank of Libya;
The Minister of Oil and Gas;
The Minister of Planning;
The Minister of Finance;
The Minister of Economy and Trade;
The Chairman of the NOC’s Board of Directors;
The Head of the Renewable Energy Authority; and
The Chairman of the Board of the General Electricity Company of Libya.
The Supreme Council holds its meetings, at least once every three months, or whenever necessary, upon the invitation of its chairman. Furthermore, the Supreme Council is empowered to have advisory committees, each comprising individuals renowned for their high-level expertise in various energy-related fields (Decree No. 790 of 2022).
Notably, the NOC is responsible for paying the bonuses to members of the Supreme Council as well as its committees. The NOC also covers any other financial commitments that may be mandated by resolutions issued by the Supreme Council's resolutions (Decree No. 790 of 2022).
Concluding Remarks
The Libyan petroleum landscape comprises key entities with varying roles and powers. The NOC has a broad operational authority in Libya's petroleum industry, including exploration, production, and marketing. While it oversees its subsidiaries and industry stakeholders, the NOC is subject to oversight from the MOG and the Council of Ministers.
The MOG enjoys regulatory and supervisory authority over the NOC and other participants in the Libyan petroleum industry. On the other hand, the Council of Ministers plays a central decision-making role which also enables it to exercise supervisory power over the NOC and other important aspects of Libya’s petroleum industry.
While a relatively new body, the Supreme Council focuses on policy-making, energy plans, and performance evaluations in the energy sector, including oil, gas, renewables, and electricity.
Although the roles of these entities may appear straightforward, certain aspects of their powers have been described as conflicting and ill-defined. This lack of clarity has, at times, resulted in significant conflicts among some of these entities. However, a comprehensive discussion of this topic is better suited for a separate article.
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* Mahmud is a Libyan lawyer with many years of experience advising on various Libyan law matters. He specialises in the area of energy law including oil and gas laws and regulations. Mahmud's LLM Dissertation (which received a Distinction) focused on reforming the structural framework of Libya's petroleum sector, particularly the NOC, in light of international best practices.
List of References
Law No 25 of 1955 on Petroleum Law as amended and its Regulations.
Law No 13 of 1968 on the Establishment of the Libyan General Petroleum Corporation.
Law No. 24 of 1970 on the Establishment of the National Oil Corporation.
Decree No. 10 of 1979 on the Reorganisation of the National Oil Corporation.
Decree No. 232 of 2021 on Adopting the Organisational Structure of the Ministry of Oil & Gas and Determining its Powers.
Decree No. 790 of 2022 on the Reorganisation of the Supreme Council of Energy Affairs.
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