Libyan Investment Law: Foreign Oil Companies

By Dr. Mohamed Karbal,  Managing Partner at Karbal & Co.

Libya is not only notorious of being one of the toughest Middle East countries in enacting oil regulations but also is known for its rigorous negotiation tactics. The Libyan Petroleum Law no. 25 of 1955 divided concession areas into small exploration sections not exceeding 75,000 square kilometers.

As a result of this planned Libyan strategy, in contrast to other Arab countries, many large and small companies commenced exploring the Libya desert. This enabled the Libya government to deal with many investors rather than dealing with monopolistic domination by one or two investors with control of the entire concession areas.

In the 1960’s and 1970’s, the Libyan government began negotiations with various companies regarding a percentage amendment of the Libyan royalties. Many companies agreed to increase the royalties’ percentage which resulted in a subsequent profitable production-sharing agreement with the government. Yet, others refused and faced the axe of partial nationalization.

Forty-two years of the Kaddafi regime’s apathetic attitude and incoherent economic development strategies left Libya as one of the least developed of the oil producing countries. Further, the Kaddafi’s regime’s obliteration response to the February 2011 Libyan uprising resulted in even more devastation of the already dilapidated infrastructure.

In this atmosphere of underdevelopment, ignorance and destruction which was inherited by the New Libya leaders, they were required to seek quick solutions to hasten the rebuilding and rushed to enacting new economic laws. Yet, there was hesitation by the lawmakers for their decision concerning the legal framework under which foreign companies will operate in the New Libya.

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