Libya is the holder of Africa’s largest proved oil reserves, and plays a vital role in the world’s consumption of light sweet crude oil.
By September 2012, Libya’s oil production had nearly reached its pre-revolution levels of 1.6 million barrels per day (BPD). The 344% increase in the hydrocarbon component of gross domestic product (GDP) in 2012 was the main driver behind the high GDP growth (95.5%) in 2012. Although non-hydrocarbon economic activity accounts for more than 22% of GDP and a negligible part of total exports.
The major long-term challenge facing the economy is to contain the dependence on oil revenues, particularly in light of the slowdown in international demand, and the urgent need for economic diversification in order to address the long-term financial and economic stability and Libya’s unemployment challenge. Despite its large contribution to the GDP, the oil and gas sector contributes to less than 2% of total employment.
Despite the increase in hydrocarbon revenues, the increase in domestic demand and high expenditure on subsidies and public-sector wages pose fiscal pressures on the government.Sustainable management of Libya’s petroleum resources is a major challenge facing the new Libyan leadership. The management of domestic oil operations, co-ordination of the fast-growing inflow of foreign direct investment (FDI) in the petroleum sector, and containing the political and regional tensions over distribution of oil revenues are major variables determining the sustainable management of the petroleum sector.