Oil made Gaddafi’s Libya and it will build - or ruin - its successor

TLDR: Oil will decide what Libya’s future looks like.

Right now there are three main scenarios:

• Pull towards unity: revenue-sharing agreements bring communities together to benefit
• Pull towards division: the monopoly of the National Oil Corporation is broken and regions seekto capitalise on their own resources independently
• Status quo: the promise of oil wealth encourages factions and their external backers to seek togain the upper hand through political and military manoeuvres

For now the status quo is entrenched and it would take a significant event to break it: here’s how that could happen and why it matters.

What’s at stake?

When reports emerged at the end of May that the government in eastern Libya had ordered the National Oil Corporation to redirect revenues away from the country’s central bank, rumours quickly escalated to point to military involvement.

The speed of response from the authorities, playing down the incident as a minor administrative dispute, illustrates how quickly any question related to the oil industry can escalate into a national flashpoint.

The background

For four decades up to 2011, oil wealth allowed Muammar Gaddafi to maintain a patronage network that held together diverse clans and territories under his control.

But since the abrupt end to his regime, Libya’s oil reserves have proven both a blessing and a curse. Libya’s energy sector has the resources to push production beyond 1.4 million barrels per day and holds Africa’s largest proven reserves. Just this month the NOC announced a new oil discovery in the Ghadames Basin, highlighting Libya’s still untapped potential.

Yet instead of facilitating national recovery, oil riches have driven political fragmentation, rival militia actions, and stalled governance.

Control of oil infrastructure, export routes, and revenue sharing remains the most disputed issue between Libya’s two governments: the Tripoli-based Government of National Unity (GNU) and the Benghazi-aligned government backed by the House of Representatives (HoR) and the Libyan National Army (LNA). Each side seeks to leverage oil to secure legitimacy, co-opt militias, and attract foreign influence.

Earlier this month, conflicting reports emerged claiming Field Marshal Khalifa Haftar allegedly offered Libyan citizenship to one million Gazans in exchange for Tripoli relinquishing oil control, a plan reportedly linked to U.S. and Turkish mediation but dismissed by Washington as false. While the plan itself is implausible, Haftar may have floated the proposal with an eye toward Washington, knowing that a U.S. administration could see value in resettlement options. By positioning himself as the facilitator, Haftar would potentially be seeking U.S. political backing in return, particularly to strengthen his hand over Libya’s oil sector.

Comment: a dilemma for investors

The NOC, based in Tripoli, is the only internationally recognised entity able to sell oil, with revenues routed through the Central Bank. Nevertheless, armed groups, factions, and political actors regularly exert authority over terminals, pipelines, and production sites: the Eastern bloc affiliates have stated they will blockade major terminals like Sidra and Ras Lanuf unless demands for revenue-sharing and reform are met while communities in the south sometimes shut down pipelines in protest of underdevelopment and exclusion.

The GNU has been accused of using oil revenues to patronise loyalist militias and ministries, worsening accountability and prompting corruption allegations. Recent reshuffles of leadership within the NOC and Central Bank have been viewed by observers as power plays rather than genuine repositioning. The result is an internally fissured state, with institutions like the NOC, Central Bank, and Petroleum Facilities Guard responding to multiple authorities, or none at all.

While the NOC is officially headquartered in GNU-administrated Tripoli, many of Libya’s major oilfields and export terminals lie in areas where the LNA exercises military influence, particularly in central and southern Libya.

For foreign companies and governments, this presents a predicament. Some have signed deals with Tripoli, others with Benghazi, while many wait for an elusive piece of clarity. In the meantime, Libya’s oil output is at risk of disruption, sabotage, or shutdown.

Earlier in August, ExxonMobil re-entered the Libyan sector, signing an MoU to study offshore and Sirte Basin prospects. This was its first deal in Libya in over a decade. Such moves highlight investor interest, but also the exposure of foreign companies to fractured institutions.

Outlook: risk of escalation remains

Libya’s oil industry will remain a fault line for instability in the immediate term. If negotiations between the western and eastern blocs stall, there is a real possibility of partial shutdowns or threats to block terminals. The incident at the NOC headquarters in May is part of a broader pattern of retaliatory provocation in which parties attempt to shift revenue flows without full-scale escalation.

The LNA may leverage unrest in Tripoli to advocate for a larger share of oil profits or pressure foreign entities to recognise the Eastern-based government. Local rivalries could also intensify tensions or provoke GNU-linked militias to make aggressive moves to retain or exercise renewed authority in ports or pipelines, which may trigger confrontations or disrupt contracts—reinstating the risk of escalation.

Over the medium term, while the likelihood of a fully-fledged parallel oil export mechanism developing out of the east is low, it is not inconceivable. If foreign actors consider deals with eastern institutions viable, this may deepen entrenched realities and frustrate the UN political roadmap.

In the absence of a comprehensive political agreement on revenue sharing and institutional unity, Libya’s oil will continue to serve as both the prize and a pressure point. Long-term development is unlikely while infrastructure remains unsupported and local governments operate as hostages to grievances and shifting allegiances.

There are opportunities. Some producing areas have seen municipal initiatives that demonstrate a willingness to cooperate across divisions, provided that local benefits are guaranteed. International mediators, such as the AU and Arab League, could help broker a transparent revenue-sharing mechanism with benchmarks tied to service delivery, infrastructure investment, and demobilisation of armed groups.

Conclusion

Once considered a guarantee for unity, Libya’s oil and gas sectors today sit at the centre of a fractured control matrix that threatens to pull the country apart. Until rival actors determine who owns the oil - and who benefits from it - Libya’s greatest resource will remain its greatest source of instability.

This report is compiled by Eigenrac is a Dubai-based boutique consultancy specialising in security risk management services, with a global presence and deep understanding of complex business risk environments. Eigenrac acts as a trusted enabler for clients operating in high-risk or demanding settings.