Hormuz Strait Crisis Boosts Appeal of Libyan Oil for Major Companies

Libya – An economic report published by the Gulf Business Outlook website says the crisis in the Strait of Hormuz has boosted Libya’s oil sector.

The report noted that major oil companies are returning to Libya after nearly two decades away. This renewed interest comes as North African oil becomes more attractive amid instability in the Strait of Hormuz.

According to the report, authorities in both eastern and western Libya now share a common goal: maximizing energy revenues. This cooperation is emerging despite ongoing tensions between the two sides. The goal has become more attainable due to disruptions in the Strait of Hormuz, through which about one-fifth of the world’s supply of oil and liquefied natural gas passes.

Energy expert Christoph Rühl said Libya previously struggled to secure exploration and production deals, especially before the Iran crisis. At that time, global oil supply exceeded demand, and investors were reluctant to enter countries facing political instability and economic difficulties such as Libya. Rühl added that the longer it takes for Gulf oil production to return to normal, the more Libya stands to benefit.

Risk management expert Dina Fayed stated that Libya’s distance from the strait, proximity to Europe, short shipping routes to North America, and high-quality crude make it attractive to global oil companies. Fayed added that Libya’s challenges go beyond the division between two governments. Both governments also struggle with internal divisions. Still, the current system is proving effective, which encourages international companies to return.

Fayed noted that operating in Libya remains difficult. Companies must complete a large amount of paperwork to work in both eastern and western regions. Security risks are also high. Armed militias guarding the oil fields can halt production at any time if they demand more money or if new conflicts arise.

According to Fayed, the Tripoli-based Dbeibah government controls the National Oil Corporation and the Central Bank. Meanwhile, about 80 percent of Libya’s oil output comes from fields in the east. The two sides agreed to cooperate because oil prices were rising sharply due to the war in Ukraine.