Despite economic sanctions, Libya remains an important oil exporter, particularly to European markets. Libya remains under international sanctions for its refusal to extradite 2 men suspected in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland.

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GENERAL BACKGROUND
Libya's relations with the international community have been strained since the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland that killed 270 people. On April 15, 1992, the United Nations imposed economic sanctions on Libya for refusing to extradite two Libyan nationals accused of carrying out the attack. These sanctions included the grounding of all air traffic to and from Libya, a reduction in diplomatic relations and a ban on all arms sales to the country. As of early November 1997, Libya had not surrendered the two bombing suspects, despite indications that sanctions were adversely affecting Libya's economy. In late September 1997, the Arab League and the Non-Aligned nations both called for an easing of sanctions on Libya. The United States responded that such efforts will not succeed unless Libya turns over the bombing suspects.

In mid-October, Libya officially asked the United States to hand over for trial U.S. pilots and officials involved in the 1986 bombing raid ordered by President Reagan. The U.S. State Department dismissed Libya's summons as "ridiculous."

U.N. sanctions were extended in November 1993 to include a freeze on Libyan funds overseas, a ban on the sale of oil equipment for oil and gas export terminals and refineries, and tougher restrictions on civil aviation and the supply of arms. The United States, which enforces its own sanctions against Libya, has made further efforts to convince the U.N. to consider a total embargo on Libyan oil. However, several key European allies that rely heavily on Libya's low sulfur oil, particularly Italy (which gets 80% of its oil from Libya) and Germany, have expressed deep reservations about this option. On August 5, 1996, the United States imposed additional sanctions on Libya. This action -- the U.S. Sanctions Act of 1996 -- extends U.S. sanctions on Libya to cover foreign companies that make new investments of $40 million or more over a 12-month period in Libya's oil or gas sectors.

U.N. sanctions have forced Libya to adopt a more conservative fiscal policy and to limit public infrastructure spending to a few main projects, such as the Great Man Made River (GMR), a $25 billion project to bring water from underground aquifers beneath the Sahara to the Mediterranean coast. The agricultural sector is a top priority for the Libyan government, which hopes that the GMR will reduce the country's water shortage and its dependence on food imports.

Faced with increasing social and economic problems partly due to sanctions, Libya's government has responded by moving ahead on a plan to share oil wealth with the country's citizens, particularly those with low incomes. In addition, Libya moved in October 1995 to expel Sudanese, Egyptian, and Palestinian guest workers. Finally, in February 1996, a shakeup of Libya's cabinet resulted in the naming of new economy, agriculture, and marine wealth ministers. In September 1997, a leader of an Islamic militant group opposed to Mu'ammar Qadhafi was killed along with three followers in clashes with the Libyan army.

OIL
Libya's oil industry is run by the state-owned National Oil Corporation (NOC), which was established in 1968. The company was set up under the Ministry of Petroleum, and empowered to engage in oil activities at every level, from exploration, drilling and production to refining, exporting and marketing. NOC also owns a number of smaller subsidiary companies which are devoted to these activities.

Following nationalization of the country's oil industry in 1973, production-sharing agreements with foreign oil companies proliferated. In most cases, NOC took at least 51% in exploration licenses (in most agreements, NOC's split was much higher, usually in the 85%-15% range). Several international oil companies currently are engaged in exploration/production agreements with NOC. The leading foreign oil producer is Italy's Agip, which has been operating in the country since 1960. U.S. oil companies began withdrawing from Libya in 1982, after a trade embargo introduced by Washington in 1981. Five U.S. companies remained active there until 1986, when President Reagan ordered them all to cease activities in Libya. Negotiations between the Libyan government and the companies to resume operations faltered after 1992, when the international community joined in imposing sanctions against Libya.

Production, Exports, and Reserves
Libya's ability to increase its oil production (and exports) apparently has been hampered by sanctions - although to what degree is uncertain -- mainly due to a ban on needed enhanced oil recovery equipment. Despite sanctions, Libya currently exports about 1.1 million bbl/d of crude oil and 200,000 bbl/d of products. Nearly all (about 90%) Libya's oil exports are sold to European countries like Italy (580,000 bbl/d in 1996), Germany (258,000 bbl/d), Spain and Greece. Oil export revenues account for about 95% of Libya's hard currency earnings.

In 1997, oil production stood at 1.43 million bbl/d, down from over 3 million bbl/d in 1970. Libya would like to boost production, but sanctions are causing delays in a number of field development and enhanced oil recovery projects, as well as deterring foreign capital investment. Faced with a mature oil reserve base, Libya's challenge is maintaining production at older fields while at the same time bringing new fields online. Reserve replacement, however, has been slipping since the 1970s.

Currently, Libya has 12 oil fields with reserves of 1 billion barrels or more, and two others with reserves of 500 million to 1 billion barrels. Libya's onshore oil is found mainly in three geological trends of the Sirte Basin: 1) the western fairway, which includes several large oil fields (Samah, Beida, Raguba, Dahra-Hofra, and Bahi); 2) the north-center of the country, which contains the giant Defa-Waha and Nasser fields, as well as the large Hateiba gas field; and 3) an easterly trend, which has such giant fields as Sarir, Messla, Gialo, Bu Attifel, Intisar, Nafoora-Augila, and Amal. Offshore, Libya has a relatively narrow continental shelf and slope in the Mediterranean and Gulf of Sirte, which widens in the west in the Gulf of Gabes. The northern part of the Gulf of Gabes, also known as the "November Seven" zone, lies on the Libyan-Tunisian border and is rich in oil and gas. As part of a 1990 settlement to a long-standing territorial dispute, the area is set to be exploited by the Libyan-Tunisian Joint Oil Company (JOC), a 50-50 venture of Libya's NOC and Tunisia's state oil company Etap. In early 1997, the block was awarded to Nimir Petroleum Co. North Africa, a private Saudi-owned firm, and Petronas Carigali of Malaysia.

With state-operated fields undergoing a 7%-8% natural decline rate, Libya depends heavily for its oil production on foreign companies and workers. European oil companies account for about 37%, or 522,000 bbl/d, of Libya's total oil production. These companies include Italy's Agip (230,000 bbl/d of production in 1997), Germany's Veba (80,000 bbl/d), Austria's OeMV (80,000 bbl/d), Spain's Repsol (50,000 bbl/d), and France's Total (which operates the Mabruk fields). These companies are now playing the role that many U.S. companies played in the past, prior to U.S. sanctions.

Libya's second-largest oil producing company is WOC, created in 1986 to take over operations from Oasis Oil Co., a joint venture of NOC, Conoco, Marathon, and Amarada Hess. WOC has been among the companies most adversely affected by the U.S. embargo. This is due to the fact that its oilfields are equipped mainly with old U.S.-made machinery for which WOC cannot now acquire spare parts. As a result, production at WOC's giant Waha field has fallen from 500,000 bbl/d in 1992 to about 350,000 bbl/d today, despite an emergency maintenance program begun in 1992.

Another large domestically-owned oil producer in Libya is SOC, originally created in 1985 as a joint venture with Grace Petroleum, one of the five U.S. companies forced by the U.S. government to leave Libya in 1996. SOC operates the Raguba field in the central part of the Sirte Basin. The field is connected by pipeline to the main line between the Nasser field and Marsa el-Brega. Nasser is one of the largest oilfields in Libya, with production of about 60,000 bbl/d of oil, down from 70,000 bbl/d in 1992. Production at Nasser is expected to fall further, to about 50,000 bbl/d, by 2000. Besides Nasser, SOC is in charge of two other fields -- Attahaddy (defiance) and Assumud (steadfastness).

Libya's oilfields are connected to Mediterranean terminals by an extensive network of pipelines. Libya's main crude oil pipelines are: Sarir-Marsa el Hariga; Messla-Ras Lanuf; Waha-Es Sider; Hammada el Hamra-Zawiya; Amal-Ras Lanuf; Intisar-Zueitina; Nasser (Zelten)-Marsa el Brega. Libya and Egypt agreed in June 1997 to build a 386-mile, 150,000 bbl/d oil pipeline from Tobruk, Libya to Alexandria, Egypt, where the oil will be refined. Construction on the $1 billion project is set to begin in December 1997.

Exploration and Development
Oil exploration in Libya began in 1955, with the first oil fields discovered in 1959 at Amal and Zelten (now known as Nasser). Libyan oil exports commenced in 1961, and the key national Petroleum Law No. 25 was enacted in April 1965. Despite sanctions, Libya is attempting to attract foreign companies with attractive incentives and production terms. Libya is generally a low-cost oil producer, with the estimated cost of expanding production estimated at 73 cents/bbl (compared with, for example, $2.80/bbl in Algeria). Libyan oil also is highly desirable, due both to its high quality and proximity to European markets.

The major component of Libya's expansion plans is development of the el-Bouri offshore oilfield, the largest producing oilfield in the Mediterranean Sea. Italy's Agip is the developer of the field, discovered in 1976 at a depth of 8,700 feet and estimated to contain 4-5 billion barrels of 26^oAPI crude, of which 650 million barrels are considered recoverable. The first phase of field development, costing $2 billion, was completed in 1990, and el-Bouri is currently producing about 110,000 bbl/d. This is down from 150,000 bbl/d in 1995, due largely to an inability to import enhanced oil recovery (EOR) equipment under U.N. sanctions. In addition to oil, el-Bouri also contains large amounts (2.5 trillion cubic feet) of associated gas.

Since the discovery of the el-Bouri field, Agip has reported a series of oil finds in its various blocks, as have other oil companies in the country. The most significant of these is in the Murzuk basin, in the Sahara south of Tripoli. This giant field, with estimated recoverable reserves of 2 billion barrels of crude, was initially awarded to the Romanian state company Petrom, which began drilling there in the second quarter of 1991. After Petrom had difficulty financing the development program in the Murzuk field, its share was purchased by Spain's Repsol in 1993 for $65 million. Repsol is currently leading a three-company European consortium, which also consists of Austria's OMV and Total of France. When work is completed in 1998, Murzuk's output of light (44^o API), sweet (less than 0.6% sulphur content) oil is expected to reach 100,000 bbl/d. Further plans call for increasing production from Murzuk to 250,000 bbl/d by the year 2000.

In October 1997, an international consortium including five South Korean companies, announced that it had discovered 1 billion barrels in crude reserves at the NC-174 Block, 466 miles south of Tripoli. If confirmed, this would mark the largest discovery ever by Korean wildcatters. Production from the field is expected to begin in early 1999.

Refining
Libya has five domestic refineries, with a combined capacity of approximately 342,000 bbl/d, nearly three times domestic oil consumption. These refineries include: 1) the Ras Lanuf export refinery, completed in 1984 and located on the Gulf of Sirte, with a crude oil refining capacity of 198,000 bbl/d; 2) the Zawiya refinery, completed in 1974 and located in northwestern Libya, with crude capacity of 108,000 bbl/d; 3) Tobruk, which came online in 1985, with 18,000 bbl/d of crude capacity, operated by Arabian Gulf Oil Co. (Agoco); 4) Marsa el Brega, the oldest refinery in Libya, located near Tobruk with crude capacity of 9,000 bbl/d; and 5) a 9,000 bbl/d topping plant at Sarir operated by Agoco.

Libya also has diversified refining operations into Europe, where Oilinvest, the overseas arm of NOC, has a network of refineries with 300,000 bbl/d of capacity (Oilinvest consists of about 40 companies, including main subsidiaries Tamoil and Gatoil). Combined, Libya's domestic and foreign refining capacity of 642,000 bbl/d can handle nearly half of the country's crude oil output. Libya is now a direct producer and distributor of refined products in Italy, Germany, and Switzerland. In Italy, Tamoil Italia, based in Milan, controls about 5% of the country's retail market for oil products and lubricants, which are distributed through 2,000 Tamoil service stations

Libya's refining sector has been adversely affected by U.N. Resolution 883, passed on November 11, 1993. This resolution specifically bans the import by or sale to Libya of refinery equipment, as well as spare parts for almost all equipment in the oil sector. In recent years, several projects for expanding and modernizing domestic refineries -- which are badly in need of upgrading -- have been delayed or shelved. These include a plan for a new 20,000 bbl/d refinery in Sebha for the purpose of processing crude from the nearby Murzuk field, and a 200,000 bbl/d export refinery in Misurata. In addition, inability to purchase needed spare parts has caused disruptions to fuel oil and gasoil production at the 108,000 bbl/d Zawiya refinery, while expansion and upgrading work to be done at Ras Lanuf (where the steam cracker needs repair) and at Tobruk has not been carried out.

Petrochemicals
The Marsa El-Brega fertilizer complex, completed in 1985, produces ammonia, urea and methanol. Despite the fact that the complex is operating only at about 35% of its nominal capacity, its production of urea and ammonia far exceeds domestic demand for such products.

The Ras Lanuf complex came on stream in 1987 with an ethylene unit that uses naphtha from the nearby refinery as feedstock, a propylene unit, and a butane unit. In 1989 a group of four companies led by the Yugoslavian company Energoinvest signed a $130 million contract for the construction of the four units that will make up the second phase of the Ras Lanuf complex. These four units include a butadiene recovery unit, an MTBE unit, a butane­1 unit and an aromatics unit. The contract was terminated, however, in 1993 due to the failure of the Energoinvest group to fulfill the terms of its contract as the crisis in ex-Yugoslavia worsened.

NATURAL GAS
Continued expansion of gas production remains a high priority for Libya for two main reasons. First, Libya has aimed to use gas instead of oil domestically, freeing up more oil for export. Second, Libya is looking to increase its gas exports. Libya's proven natural gas reserves in 1997 are estimated at 46.3 trillion cubic feet (Tcf), but the country's actual gas reserves are thought by Libyan experts to be considerably larger, possibly 50-70 Tcf. In recent years large new discoveries have been made in the Ghadames and el-Bouri fields, as well as in the Sirte basin. Libya also produces a small amount of liquefied petroleum gas (LPG), most of which is consumed by domestic refineries.

Natural gas consumption has been rising at a 10% annual rate since 1990. Besides gas used for injection into oil fields, most of this consumption has been by the petrochemical industry at Ras Lanuf, and by electric power sectors. In recent years, several power plants have switched from fuel oil to natural gas, and four new gas-powered plants have been built recently.

Potential exists for a large increase in Libyan gas exports to Europe. In June 1996, Italy's ENI's group signed an agreement with Libya's state-owned National Oil Company on a plan whereby Italy will import around 280 Bcf of Libyan gas per year by pipeline under the Mediterranean to southeastern Sicily and then on to the Italian mainland. Under this plan, Agip is to develop huge Libyan gas reserves in offshore Block NC-41 in the Gulf of Gabes, as well as in the Wafaa onshore field on the Algerian border. Total investment in this project is expected to be around $5.7 billion, and gas is expected to begin flowing in 2000.

Agip also has promoted linking the reserves of both Egypt and Libya to Italy by pipeline. An agreement in principle to link Egypt and Libya's gas grids was reached in June 1997, following a visit to Libya by Egyptian President Husni Mubarak. Yet another proposal is to build a pipeline from Egypt and Libya to Tunisia and Algeria, from where it would hook up with the existing pipeline to Morocco and Spain. Also, Tunisia and Libya agreed in May 1997 to set up a joint venture which will build a natural gas pipeline from the Mellita area in Libya to the southern Tunisian city and industrial zone of Gabes.

In 1971, Libya became the second country in the world (after Algeria in 1964) to export liquefied natural gas (LNG). Since then, Libya's LNG exports have generally languished, largely due to technical limitations which do not allow Libya to extract LPG from the LNG, thereby forcing the buyer to do so. Libya's LNG plant, at Marsa El Brega, was built in the late 1960s by Esso and has a capacity of 124 billion cubic feet per year, but due to technical limitations only about one-third of this is available for export, mainly to Enagas of Spain. Work to refurbish and upgrade the El Brega LNG plant in order to deal with the LPG separation problem has been delayed since 1992. If completed, Libyan LNG exports could triple, with

likely customers including Spain, Turkey and Italy.

ELECTRIC POWER
Libya currently has electric power production capacity of about 4.5 gigawatts. Electricity production in Libya is expected to grow at an average annual rate of 5% through the 1990s. Most of the country's existing power stations are oil-fired, though several have been converted to gas. Projects have been planned to develop other gas-fired facilities, although most appear to have stalled. In February 1995, for instance, Siemens won a letter of intent to build a 450-megawatt, gas-fired power plant in Sebha, 300 miles south of Tripoli. Originally, the plant was to have been completed in 18 months, but this has not happened. Other plans to utilize natural include an 800- megawatt power plant in Zuwara on the west coast and an electric plant and desalination complex in Sirte.

For a variety of reasons, Libya also has considered development of nuclear power. Currently, Libya has a nuclear research center at Tadjoura, near Tripoli, which is capable of processing radioisotopes. Libya has also made discoveries of uranium along the border with Chad, which could ultimately provide fuel for nuclear power stations if any are ever built. In late October 1997, a Russia's Minister of Emergency Situations, Sergei Shoigu, stated that Russia was ready -- in spite of European sanctions -- to begin talks with Libya about upgrading Libya's nuclear research station. Libya has an outstanding foreign trade debt to Russia of $2.4 billion, which Russia is eager to see repaid.

COUNTRY OVERVIEW
President (Chief of State): Mu'ammar Qadhafi (since September 1, 1969)
Independence: December 24, 1951 (from Italy)
Population (1997E): 5.8 million
Location/Size: North Africa/1,775,500 sq km (685,524 sq mi), slightly larger than Alaska
Major Cities: Tripoli (capital), Benghazi, Misurata
Languages: Arabic; Italian and English widely understood in major cities
Ethnic Groups: Arab (97%)
Religions: Sunni Muslim (97%)
Defense (1996E): Army (35,000), Air Force (22,000), Navy (8,000)

ECONOMIC OVERVIEW
Currency: Libyan Dinar (LD)
Market Exchange Rate (1997E): US$1=0.37 LD
Gross Domestic/National Product (GDP) (1997E, market exchange rates): $77.5 billion
Real GDP Growth Rate (1997E): 1.9%
Inflation Rate (consumer prices, 1997E): 25%
Current Account Balance (1997E): -$560 million
Major Trading Partners: Italy, Germany, UK, France, Turkey, Greece
Merchandise Exports (1997E): $11.4 billion
Merchandise Imports (1997E): $10.6 billion
Merchandise Trade Balance (1997E): $740 million
Major Export Products: Crude oil, refined petroleum products, natural gas
Major Import Products: Machinery, transport equipment, food, manufactured goods
Total External Debt (non-military) (1995E): $5.6 billion
International Reserves (1997E): $5.3 billion

ENERGY OVERVIEW
Energy Minister: Abdullah Salim Al-Badri
Proven Oil Reserves (1/1/97E): 29.5 billion barrels
Oil Production (1997E): 1.43 million bbl/d, of which 1.35 million bbl/d is crude oil
Oil Consumption (1997E): 125,000 bbl/d
Net Oil Exports (1997E): 1.3 million bbl/d (1.1 million bbl/d crude, 200,000 bbl/d products)
Major Oil Customers (1997E): Italy (40%), Germany, Spain, France, Austria, Greece, Britain, Switzerland
Oil Export Revenues/Total Export Revenues (1997E): 95%
Crude Oil Refining Capacity (1997E): 342,000 bbl/d
Natural Gas Reserves (1/1/97): 46.3 trillion cubic feet (Tcf)
Natural Gas Production (1997E): 220 billion cubic feet (Bcf)
Natural Gas Consumption (1997E): 184 Bcf
Electric Generation Capacity (1997E): 4.5 gigawatts
Electricity Generation (1996E): 17.0 terawatthours

ENVIRONMENT OVERVIEW
Total Energy Consumption (1995E): 0.54 quadrillion Btu
Energy Consumption per 1987 Dollar of GDP (1995E): 22.9 thousand Btu (vs. 16.7 thousand Btu in U.S.)
Energy Consumption per Capita (1995E): 102.1 million Btu (vs. 345.9 million Btu in U.S.)
Energy-related Carbon Emissions (1995E): 9.7 million metric tons (0.1% of world carbon emissions)
Carbon Emissions per Capita (1995E): 1.9 metric tons (vs. 5.5 metric tons in U.S.)
Major Environmental Issues: Desertification, sparse water resources

OIL AND GAS INDUSTRIES
State Oil Company: Libyan National Oil Company (NOC) ­ Manages the state­owned oil industry, Oilinvest - Manages all overseas investments, Arab Oil and Gas Company (Agoco), Waha, Sirte, Zueitina
Major Ports: Tripoli, Benghazi, Mersa Brega, Misurata
Major Oil and Gas Fields: Murzuk, Kabir, Bu Attifel, el-Bouri
Major Pipelines: Marsa el-Brega, Defa-Nasser, Nasser- Hatiba, Nasser-Brega, Intisar A-Hatiba
Major Refineries (crude oil capacity): Ras Lanuf (198,000 bbl/d), Zawiya (108,000 bbl/d),Tobruk (18,000 bbl/d), Marsa el-Brega (9,000 bbl/d), Sarir (9,000 bbl/d)

Links to other sites:
1997 CIA World Factbook - Libya
U.S. Treasury's Office of Foreign Assets Control
U.S. Iran-Libya Sanctions Act

The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.

ArabNet: Libya
The Center for Middle Eastern Studies - Libya
Libya: a country study by the Library of Congress
Libya: A country Profile from Arab World Online
Libyan Oil Industry Profile from Mbendi Information Services

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File last modified: November 10, 1997

Contact:

Lowell Feld
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