Early years
Libya has attracted hydrocarbon exploration since 1956, when the first wildcat oil well was drilled onshore in the Sirte Basin. Libya granted multiple concessions to Esso, Mobil, ENI, Texas Gulf, and others, resulting in major oil discoveries by 1959.[5] In 1969, the Idrissid monarchy was overthrown in a bloodless coup led by Muammar Gaddafi. He eventually elaborated a new theory of the state in which all productive units and workplaces were to be directly governed by popular congresses. As part of his vision, the National Oil Corporation was established on 12 November 1970. The company's first chairman was Salem Mohammed Amesh, who was later replaced by Omar Muntasir.[6] Under its articles of incorporation, NOC was legally restricted to Production sharing agreements (PSA) with international oil companies (IOCs) where the latter assumed all risks associated with exploration. In July 1970, further legislation made NOC responsible for marketing all domestic oil products.
Nationalization and the Arab oil embargo
In the 1970s Libya initiated a socialist style nationalization program under which the government either nationalized oil companies or became a participant in their concessions, production and transportation facilities.[7] As part of this program, NOC signed production-sharing agreements with Occidental Petroleum, Sincat (Italy), and formed a joint drilling company with Saipem (an Eni subsidiary). This was accompanied by nationalization of ConocoPhillips's Umm Farud field in 1970, British Petroleum's Sarir field in 1971 and Amoco's Sahabir field in 1976. After commencement of the 1973 Arab-Israeli War, Saudi Arabia, Libya, and other Arab states proclaimed an embargo on oil exports to countries that supported Israel, primarily the United States. Additionally, the NOC had encountered legal actions by BP over claims of ownership. Although the 1973 oil crisis increased global demand, BP's legal position made some countries wary of importing from Libya. NOC compensated for this weakness by arranging barter deals with France and Argentina. On March 18, 1974, the Arab oil ministers ended the US-embargo, with Libya being the sole exception. During 1974, agreements reached with Exxon, Mobil, Elf Aquitaine and Agip provided production-sharing on an 85-15 basis onshore, 81-19 offshore.
U.S. sanctions
The last phase of the socialist period was characterized by an intensive effort to build industrial capacity, but falling world oil prices in the early 1980s dramatically reduced government revenues and caused a serious decline in Libya's advantage in terms of energy costs.[9] More importantly, accusations of terrorism and Libya's growing friendship with the Soviet Union led to increased tensions with the West. On 10 March 1982, the U.S. prohibited imports of Libyan crude oil. Exxon and Mobil left their Libyan operations by January 1983. In March 1984, controls were expanded to prohibit exports to the Ras al-Enf petrochemical complex.
President Ronald Reagan imposed sanctions on 7 January 1986 under the International Emergency Economic Powers Act, prohibiting US companies from any trade or financial dealings with Libya, while freezing Libyan assets in the US.[10] On 30 June 1986, the US Treasury Department forced remaining US oil companies to leave Libya but allowed them to negotiate standstill agreements, retaining ownership for three years while allowing NOC to operate the fields. As a result, Amerada Hess, Conoco, Grace Petroleum, Marathon, and Occidental left a production entitlement that was generating 263000 oilbbl/d. Negotiations with NOC and US oil companies over assets dominated much of the late 1980s.
Libya responded by concluding its third Exploration and Production Sharing Arrangements (EPSA-III) in 1988, including agreements with Rompetrol
U.N. sanctions and afterward
Libya's isolation became even more pronounced following the 1992 imposition of United Nations sanctions designed to force Gaddafi to hand over two suspects indicted for the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. The sanctions, imposed on 31 March 1992, initially banned sales of equipment for refining and transporting oil, but excluded oil production equipment. Sanctions were expanded on 11 November 1993, to include a freeze on Libya's overseas assets, excluding revenue from oil, natural gas, or agricultural products. Under these condition, NOC Chairman Abdallah al-Badri emphasized reducing new projects and upgrading domestic facilities. Joint ventures were initiated with Veba, Petrofina, North African Petroleum, the Petroleum Development Co. (Republic of Korea) and Lasmo. Foreign operators were encouraged to produce exclusively for export, limited to national oil companies with pre-sanctions equity in Libya. This policy was an attempt to contain the amount of crude offered on the spot market through third-party traders, and increase downstream investment. In 2000, NOC was reorganized by the General People's Congress after the Ministry of Energy was abolished, further consolidating control over the sector.
Although U.N. sanctions were suspended in 1999, foreign investment was curtailed due to the U.S. Iran and Libya Sanctions Act (ILSA), which capped the annual amount foreign companies can invest in Libya at $20 million (lowered from $40 million in 2001). On 14 August 2003, Libya agreed to compensate families of the 1988 bombing with $2.7 billion, to be released in three tranches; the first following a lifting of UN sanctions, the second after lifting of US sanctions, and the third after Libya is removed from the U.S. State Department's state sponsors of terrorism list.
Libyan civil war and transition
During the 2011 Libyan civil war, Oil Minister Shukri Ghanem defected and fled to Tunisia.[13] In September 2011, the National Transitional Council named Nuri Berruien as chairman of the NOC during the transitional period.[14] After a period when NOC was split between rival governments in eastern and western Libya, leaders in July 2016 reached an agreement to reunify the company's management.[15] However, on 2 July 2018 they quarreled again.[16]
