Corresponding Author: Mohamed Ibrahim, PhD Candidate, Faculty of Leadership and Management, Universiti Sains Islam, Malaysia.
202
The importance of Oil and Gas sector for Libya: Current scenario and future trends
1Mohamed Ibrahim, 2Mahazan Abdul Mutalib, 3Adel M.Abdulaziz
1PhD Candidate, Faculty of Leadership and Management, Universiti Sains Islam, Malaysia.
2Senior Lecturer, Faculty of Leadership and Management, Universiti Sains Islam, Malaysia.
3Associate Professor, Faculty of Quranic and Sunnah Studies, Universiti Sains Islam, Malaysia.
Abstract: The study was conducted to analyze the importance of oil and gas sector in Libya. This study also describes the current scenario and future trends in oil and gas sector of the country. The paper describes the benefits of oil and gas sector in the economy of Libya. Moreover, the discussion section explains the situation of the current scenario of oil and gas sector in the country. Overview of Oil and gas sector is separately described in this section with the help of variety of charts. Future trends are also part of this section which explains the future plans for this sector by the government of Libya. These plans include with future forecasting of production in oil and gas sector. The production rate of oil and gas sector in the last year is explained in this section. Moreover, opportunities and challenges of oil and gas sector are also illustrated in this paper. It is analyzed that oil and gas is facing many challenges such as political instability, transparency in business practices, security issues and practical logistic issues. The government of Libya must solve these issues in order to sustain the development of economy. This sector also contains some major opportunities such as development of economy through better infrastructure, revamp its global strategies to attract global oil and gas companies, to explore new reserves in the country and use new techniques for exploration and production of oil and gas. The government of Libya must work out on these opportunities for enhancing the economic development in the country.
Key words: Abundant, infrastructure, Unemployment, Foreign Investment, Crude Oil INTRODUCTION
The oil and gas sector is considered as the primary source of revenue for Libya. Therefore, the oil and gas industry helps to enhance the development of the economy in the country. This sector also contributes to the provision of better health services and modern education to the peoples of Libya. Moreover, it is observed that Libya fulfilled its responsibilities for providing the training to the employees of oil and gas sector. It is approved in the British petroleum statically survey in 2012 that Libya has got abundant oil reserves of 40.099 billion barrels (RT, 2013).
The national oil corporation (NOC) is playing a vital role in the economic development of Libya. It has built its own technical institutes for providing high quality education to the employees and workers of this industry. Basically these are Petroleum Training institutes which are specifically made in the oil industry. These institutes also help to the Libyan Government for reducing the rate of unemployment in the country.
Furthermore, The Umm Jawaa by Oil Services Company is working in London on the behalf of NOC. Libya is distributing its oil products and lubricants in Egypt, Italy, Switzerland and Germany (Usa, 2009).
MATERIAL AND METHOD
The data was gathered from the government of Libya in order to understand the importance of oil and gas sector in the country. It is analyzed that oil and gas industries have huge significance for the government of Libya. Even though this sector is considered as the most important sector for increasing the income for Libya but it is providing many other benefits also to the country which are described below in details.
2.1 Primary Source of Revenue:
It is analyzed that economy of Libya is hugely dependent on the energy sector and specifically on oil and gas sector. It generates more than 90% of revenue for the government of Libya whereas its 95% of export earnings are through selling of oil and gas. Moreover, oil and gas sector is contributing 80% of GDP in economy of Libya. This is the primary reason which provides the highest GDP rate to Libya in entire Africa. Therefore it is examined that oil and gas sector helped Libya to enhance the level of infrastructure of the country (CIA, 2012).
2.2 Benefi It is ob in Libya. G that oil and 2007 to 20 fresh gradu 2013).
2.3 Increas Oil an governmen license to m terms with developme governmen sector attra Discussion Current Sc Libya reserves o Countries enhance th determent control of gas produc restrain its Overview o As it w therefore it oil product 47.1 billion Ranking of
It is an of NOC to
0 5 10 15 20 25 30 35 40 45 50
its of Employm bserved that de Gas and petrole d gas sector he 011. The expan uates. This fac
sed Foreign In nd gas sector a nt of Libya ap
many compani h the purpose to
ent of Libya ( nt of Libya to b acted many lea n:
cenario:
is considered f gas and petr (OPEC). It wa he developmen
for the econom the oil and gas cts in 2010 du all oil and gas of Oil Sector:
was described t is contributin tion after long n barrels of oil of Oil Producti
nalyzed that N o produce 2.5 m
Libya ment:
evelopment in eum industry h elped to reduce nded productio
ctor also affec
nvestments:
attracted many ppreciated the
ies for workin o attract more Otman & Kar because the go ading oil compa
d as a significa roleum in Afr as necessary fo nt of the coun my of Libya th s sector in the ue to worst ci s reserves and e
earlier that Lib ng in the globa
time of confli reserves (Hau ion in Africa (2
NOC is respons million barrels
oil and gas sec has been benefi
e the unemploy n of oil and ga cted on the eco
y European co interest of for g in Libya. M investors. Join rlberg, 2007).
overnment was anies to come a
ant exporter co rica. It is also or the governm
ntry after the herefore it was country. It is a rcumstances o earned valuabl
bya is part of al supply of cru icts. It is demo uslohner, 2013)
2012):
sible for explor of year per da
Nigeria
ctor played im icial to the dom yment rate up as sector provid onomic recove
ountries toward reign direct inv oreover, the go nt ventures of
Foreign Direc unable to hand and produce oi
ountry for oil o a member o ment of Libya regime of Qa s the first prior analyzed that L of the country.
e revenue from
the OPEC and ude oil to inter onstrated by Oi
).
ration and prod ay in the comi
A
mperative role in mestic econom
to 30% in bot ded job opport ery and develo
ds Libya for o vestment in th
overnment offe oil and gas sec ct Investment
dle the excessi il.
and gas secto f the Organiz to recover the adhafi. Oil an rity of the new Libya consume . Later on, in m this sector.
d contains the l rnational mark il and Gas Jour
duction of oil i ing five years.
Algeria
n reducing une my of the countr th industries be tunities to the u opment of the
oil and gas inv he country and fered many ben ctor also pushe had huge sign ive amount of o
or. It contains ation of Petro e oil and gas se nd gas sector w government t ed 70 percent o the beginning
largest volume ket. In 2011, L rnal in 2012 th
in the country.
Net export of Ango
employment ra ry. It is analyze etween the yea unemployed an
country (Eljar
vestments. Th issued workin neficial financi
ed the econom nificance for th
oil and gas. Th
highest volum oleum Exportin ector in order
is an importa to hold back th of petroleum an g of 2011 Liby
e of oil in Afri Libya restored i
hat Libya carri
Now it is targ f Libya in the o
ola
ate ed ars nd rh,
he ng ial mic he his
me ng to ant he nd ya
ca its ies
get oil
sector is a considered exporting o exporter co
Overview o Natura that Libya production reserves in
It is o crude oil a which are Shell, Exxo
0 5 10 15 20 25 30
0 20 40 60 80 100 120 140 160 180 200
approximately d as main expo
oil. These term ountries is show
of Natural Gas al gas industry contains less n to Italy throu n Libya and ann
observed that c and natural gas considered as onMobil and B 0
5 0 5 0 5 0
Nigeria
Ran
1.8 million b ort countries in minals include
wed in the nex
s:
of Libya also reserves of na ugh pipelines ( nounced that it
currently many s in Libya. Mor an essential pa British Petroleu
Expor
Algeria Eg
nking of
barrels per day n oil sector fo with the facili t paragraph.
recovered in 2 atural gas as co (Holz et al. 20 t has abundant
y other organiz reover, many i art of every ne um etc.
rt Count
gypt Liby
Natural (2
y according to or Libya. Furth ties of product
2011 after solvi ompared to oi 008). Oil and G
gas reserves ab
zations are inv international co ew oil and gas
tris for C
a Restof Africa
Gas Res 2012)
o 2011. Italy, hermore, Liby tion, storage an
ing the conflict l. Libya expor Gas Journal ga bout 52.8 trillio
volved in the ompanies are a
project. These
Crude Oi
Export C
serves H
Rankin Holder
France, China a is using man nd offloading.
ts with militan rts huge part o athered the dat on cubic feet.
exploration an also involved i e large compan
l
Countris for Cr
Holders
ng of Natural G rs (2012)
a and Japan a ny terminals f The chart of o
nts. It is analyze of its natural g
ta of natural g
nd production in the operation nies include wi
rude Oil
as Reserves are for oil
ed gas gas
of ns ith
205
It is surveyed that gas production increased in the last two years in Libya. The country produced 1069 cubic feet of gas in the year of 2012. The domestic use of natural gas was approximately 242 billion cubic feet in the 2012. Libya exports huge volume of its gas production to European countries by the means of pipelines. It was approximately 51.48 billion in2012. The total export of natural gas was approximately 352 billion cubic feet in the year of 2012. Furthermore, now the government of Libya has opened two offices in Tripoli with the purpose to allow the global oil and gas organizations to visit this place and review the information regarding the reserves of oil and gas sector (Ash, 2013).
Future Trends:
It is said by government officials that Libya would boost its oil production by producing 1.5 million barrels to 1.7 million barrels per day at the end of the 2013. It is also articulated that the government would explore more reserves of gas and provide safety and security needs in the gas and petroleum sector (Wood, 2013). This industry contains the huge significance for the country therefore it is the first priority of newly established government to recital this industry in order to achieve high growth rate (Oil & Gas Libya, 2013). The government of Libya specially focuses on the following issues:
It would update its petroleum laws and contracts
Appreciate for identification of new opportunities
It would develop infrastructure with the purpose to facilitate foreign investors
It would focus on the Human capital development
Utilize latest techniques for maximizing production from recourses
It would explore new opportunities in the market
Moreover, the government would build strong relationship with European countries. Security issues are a major concern for new investors’ therefore government would provide better security on and off duty employees. It is vital to utilize all available recourse for future development in this sector. The government of Libya would try its best for a balanced economy through utilizing all the recourses of oil and gas sector (Libyan Intelligence Group, 2013).
Challenges:
Even though oil and gas sector is playing a vital role in the economy of Libya but there are many challenges for the government in order to keep this process continues in the future. It is very difficult for government to run all the operations in the oil and gas fields even after finishing the conflicts. It is examined that NTC holds limited recourses and administrative capacity therefore it can't work on every place at the same time. It is a tough decision for government to leave everything on the behalf of other companies.
Political instability is a major challenge for the government which it could not be solved properly. Foreign investors feel insecure while investing in the Libya due to this political instability and security issues. Political stability and economic growth are directly with each other and oil and gas sector carries equal importance of each factor (Oil & Gas Libya, 2013).
Another challenge for government is transparency in business practices. It is criticized by some global organization due to this issue. It is very necessary for economic growth and development to provide transparency in business practices. Now current government is taking this issue seriously and trying to implement new contract rules for business practices in the country.
Moreover, practical logistics issues, flying issues, visa processing issues and short supply of hotels are those factors which continually putting off foreign direct investment. Libya is facing many issues in banking problems which are increasing with the passage of time. There are many infrastructure issues because Libya is not spending enough amounts to facilitate the investors with new roads. The sea ports of Libya are not enough for the carriage of huge capacity which is another drawback of this country. These all are considered as major challenges for Libya and government must change its strategies in order to facilitate current investor and to attract more foreign investors towards this sector (The Guardian, 2011)
Opportunities:
The oil and gas sector provides many opportunities for the government and peoples of Libya. These opportunities are listed below:
It can build up its infrastructure through revenue of oil and gas sector
Oil and gas sector has potential to decrease the unemployment rate at a minimum level in the country
It contains the opportunity to revamp its strategies for attracting new global oil and gas companies such as Chevron etc.
The government has the opportunity to explore new oil and gas reserves in the country
To use the latest techniques and tools for exploration and production of oil and gas (Mainwaring, 2013)
206 Conclusion:
It is concluded from the analysis that oil and gas sector has huge importance in Libya. The economy of Libya is vastly dependent on this sector. This sector is playing an imperative role in the development of the country. Oil and gas sector is the primary source of revenue for Libya. Oil and gas sector helps to reduce the unemployment rate in the country. It is analyzed from the research that oil and gas sector helped to reduce the unemployment rate up to 30% in both industries between the years 2007 to 2011.
Libya is spending huge amount of its revenue on better infrastructure for the peoples of Libya. It generates more than 90% of revenue for the government of Libya whereas its 95% of export earnings are through selling of oil and gas. Moreover, oil and gas sector is contributing 80% of GDP in economy of Libya. Oil and the sector is a primary reason for foreign investment in the country. Many oil and gas companies are willing to invest in Libya with the purpose of exploration and production of oil and gas.
REFERENCES
Ash, 2013. Positive outlook on first day of oil and gas exhibition. Retrieved from www.libyaherald.com/2013/04/22/positive-outlook-on-first-day-of-oil-and-gas-exhibition/
CIA, 2012. The World Fact book, Retrieved from https://www.cia.gov/library/publications/the-world- factbook/geos/ly.html
Eljarh, M., 2013. Cooperation key to tackling skills shortage in oil and gas sector, Retrieved from http://www.universityworldnews.com/article.php?story=20130220152146419
Hauslohner, A., 2013. Libya’s oil sector makes quick recovery after 2011 revolution, Retrieved from http://articles.washingtonpost.com/2013-03-16/world/37759393_1_oil-sector-oil-protection-force-oil-and-gas
Holz, F., C. Hirschhausen, & C. Kemfert, 2008. A strategic model of European Gas supply. Journal of Energy Economics.
Libyan Intelligence Group, 2013. What does the future hold for the Libyan oil & gas sector. Retrieved from http://www.libyaintelligence.org/content/what-does-future-hold-libyan-oil-gas-sector
Mainwaring, J., 2013. Escalating Violence Hold’s Back Libya’s Oil and Gas sector. Retrieved from http://www.rigzone.com/news/oil_gas/a/125819/Escalating_Violence_Holds_Back_Libyas_Oil_Gas_Sector
Oil & Gas in Libya, 2013. Oil Minister Opens Oil & Gas Libya 2013, Retrieved from http://www.oilandgaslibya.com/
Oil and Gas Libya, 2013. Oil Minister opens Oil & Gas Libya 2013. Retrieved from http://www.oilandgaslibya.com/
Otman, W., & G. Karlberg, 2007. The Libyan Economy: Economic Diversification and International Repositioning. Springer Publishers.
R.T., 2013. Libya lost $1 billion in oil industry chaos, Retrieved from http://rt.com/business/libya-oil- production-crisis-629/
The Guardian, 2011. Libya: The illusion of force. Retrieved from http://www.guardian.co.uk/commentisfree/2011/mar/10/libya-uprising-intervention
Usa, I., 2009. International Business Publications, USA
Wood, L., 2013. Research and Markets: Libya oil and Gas Industry outlook to 2020- Supply, Demand,
Investment, Infrastructure and Companies. Retrieved from http://www.businesswire.com/news/home/20130319006742/en/Research-Markets-Libya-Oil-Gas-Industry-
Outlook
