The Economy

The discovery of hydrocarbons in 1959 transformed the country from an agriculture based to a modern oil-based economy, one of the most prosperous in Africa. Libya has revived its non-oil economy and has been pursuing cautiously greater private sector participation.

The hydrocarbon sector contributes 95 percent of hard currency earnings and approximately 30% of GDP to the Libyan economy. Agriculture accounts for around five percent of GDP and employing around 7% of the labor force. Adverse climatic conditions and poor soil have severely constrained agricultural production, forcing heavy reliance on food imports. The non-oil manufacturing, construction sectors and processing (mostly agricultural products) sectors have now extended to petrochemicals, iron, steel, and aluminum.

Libya has embarked on a number of economic plans with the aim of diversification of the oil-based economy into other sectors, including tourism.

General Description
Libya’s economic growth during 2006 reached 5.6%, with real gross domestic product (GDP) estimated at $46.451 billion with a per capita income of $12,204.

In 1988, Government initiated a series of economic liberalization measures designed to encourage privatization of public sector companies and broaden the scope of private sector activities to include retail trade, small-scale industries, and agricultural businesses. A significant increase in imports of consumer goods also followed subsequent to removal on restrictive policies imports and exports. Libyan government has been working on reforms to make the business environment more attractive for foreign investors since late 1990s. The government has passed the Foreign Investment Law of 1997 and the Free Trade Act in 1999.

In 2000, Libya encouraged local and foreign investors to play a larger role in the five-year plan that helped to privatize its state-run industries. High priorities are given to the telecommunications and road infrastructure, especially a 1,400 kilometer road leading from Libya to its sub-Saharan neighbors.

Being an oil producer, it is especially vulnerable to the fluctuations in the international oil prices.

Libya is moving towards a range of economic reforms and a reduction of state’s direct role in the economy. In June 2003, Government called for privatization of the country’s oil sector, in addition to other areas of the economy and pledged to bring Libya into the World Trade Organization (WTO). A former Trade and Economy Minister, a proponent of privatization, was appointed as Prime Minister. During 2003, exchange rate system (official, commercial, black-market) was unified effectively devaluing the country’s currency. Among other goals, the devaluation aimed to increase the competitiveness of Libyan firms and to help attract foreign investment into the country. During October 2003, the Prime Minister announced a list of 361 firms in a variety of sectors including steel, petrochemicals, cement and agriculture to be privatized.

Mineral and Energy Resources

OIL
Oil exploration started in Libya in 1955, and Petroleum Law No. 25 was enacted in April 1955. The first oil fields were discovered in 1959 at Amal and Zilten known as Nasser, and oil exports began in 1961. During 2004, Libyan oil production was estimated at nearly 1.6 million barrels per day (bbl/d), with consumption of 237,000 bbl/d and net exports of about 1.34 million bbl/d.

Production
Libya produces high-quality, low-sulphur (“sweet”) crude oil at very low cost (as low as $1 per barrel at some fields). During the first half of 2003, Libyan oil production was estimated at nearly 1.5 million bbl/d, an increase from 2002 levels but still only about two-fifths of the 3.3 million bbl/d produced in 1970. Libya aims to boost oil output capacity by 150,000 bbl/d in 2012 with the help of European companies.

Libya would welcome foreign companies to participate in increasing the national oil production capacity to 2 million bbl/d by 2012-2015. To upgrade its oil infrastructure in general and meet the production target, Libya is seeking foreign investment of $30 billion through 2010. Libya is a highly attractive oil producer given its low cost per barrel and its proximity to European markets, and its well-developed infrastructure.

Exports
Libya’s exports more than 90% are sold to European countries as follows:

  • Italy 545,000 bbl/d
  • Germany 274,000 bbl/d
  • France 94,000 bbl/d

Reserves
Libya has the largest proven oil reserves in Africa. The country hopes to increase oil production capacity through increasing exploration and EOR projects.

Libya, a member of the Organization of Petroleum Exporting Countries (OPEC), holds the largest proven oil reserves in Africa, followed by Nigeria and Algeria (see graph below). Libya had total proven oil reserves of 41.5 billion barrels as of January 2007, up from 39.1 billion barrels in 2006. About 80 percent of Libya’s proven oil reserves are located in the Sirte basin, which is responsible for 90 percent of the country’s oil output. Libya remains unexplored only around 25 percent of Libya is covered by exploration agreements with oil companies.

Natural Gas
Libya aims to use natural gas instead of oil domestic power generation to free up oil for export. Libya has vast natural gas reserves and aims to increase its natural gas exports to Europe in particular. Major producing fields include Attahadi, Defa-Waha, Hatiba, Zelten, Sahl, and Assumud. Libya’s proven natural gas reserves as of January 1, 2007 were estimated at 52.7 trillion cubic feet (Tcf). With more exploration, reserves may reach possibly 70-100 Tcf. Libya’s priority is to look to foreign participation and investment in order to expand its natural gas production, marketing, and distribution.

Libyan natural gas production and exports are increasing, with the opening of the “Greenstream” pipeline to Europe in late 2004.

Production
Libya’s natural gas production has grown substantially in the last few years. Libya produced 399 billion cubic feet (Bcf) in 2005, while consuming 206 bcf. In 2006 Libya produced 985 Bcf of natural gas, more than two times the amount produced in 2005. Exports to Italy and Spain amounted to 474 Bcf, Oilfield recovery projects utilised 385 Bcf, and 146 Bcf was used in the generation of electricity in Libya.

Agriculture

Agriculture employed about 13 percent of Libya’s workforce, while its contribution to GDP represented only seven percent in 2002. Only 1.7 percent of Libya’s land is arable, and more than 80 percent of agricultural production occurs at Jebel Akhdar and the coastal plain in northwestern Libya.

Agriculture remains the main occupation of the Libyan people despite the dominance of Libya’s oil industry and despite the fact that it is closely dependent on rainfall which is often erratic.

Libya has substantial arable and pastureland, about 25% of the working population is engaged in agriculture. Only about 1% of the country’s land is cultivated, with about 8% in use as pasture. Principal crops are citrus fruits, barley, wheat, potatoes, olives, figs, apricots and dates.

The Great Manmade River (GMR) project was begun in 1984 in an effort to solve water shortages and expand arable lands with the objective of carrying water in a massive water pipeline, was initially planned to transport water to major urban areas and 300,000 to 500,000 hectares of arid desert from well-fields in the south to the northern coast, and from there to Benghazi in the east and Sirte in the west.

Tourism

Libya is a versatile tourist destination on the rise with its well preserved prehistoric archaeological sites, numerous historical locations, and 1,200 miles of sandy beaches. Tourism is not only the country’s fastest growing sector, but also the only other source of hard currency besides oil exports. Several tourism companies have been established and are attracting foreign tourists, mainly from Germany, Italy, Japan, Spain, and Switzerland.

Tourism industry in Libya has been overshadowed by the petroleum industry hence it has until recently remained largely undeveloped.

There has been relaxation of visa controls and the tourism industry has started to take form. The Sahara desert also offers a range of attractions for specialized tourism. The Libyan Desert offers places such as Gadamus, Ghat, Kufra Oasis.

In all, the General Tourism Board invested about $3bn in hotels, resorts and other tourism projects in 2005 approximately, with the aim of attracting one million tourists per year. Construction of the Corinthia Bab Africa Hotel and Radisson Blu Hotel in Tripoli are among similar projects offering luxury accommodation and new facilities for business visitors.