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). According to Oil and Gas Journal (OGJ), Libya had total proven oil reserves of 43.7 billion barrels as of January 2009, up from 41.5 billion barrels in 2008. 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 hopes to increase oil reserve estimates with incentives for additional exploration in both established oil producing areas as well as more remote parts of the country. Recent increases in foreign investment have begun to slow as a result of uncertainties stemming from OPEC quotas, infrastructure constraints, and contract renegotiations.

Libyan oil production peaked at over 3 million bbl/d in the late 1960s and has since been in decline. The National Oil Company (NOC) would like to raise oil production capacity to 2.3 million bbl/d by 2013. While this is a significant increase from EIA’s 2008 production estimates of 1.88 million bbl/d of total oil (and crude capacity estimates of 1.75) this represents a downward revision for the NOC whose earlier target for the period was 3 million bbl/d. Most of the short-term oil production increases are expected to come from enhanced oil recovery (EOR) processes. Any major new production in Libya will require additional pipeline capacity.

With domestic consumption of 273,000 bbl/d in 2008, Libya had estimated net exports (including all liquids) of 1.6 million bbl/d. According to 2008 official trade data as reported to the Global Trade Atlas, the vast majority of Libyan oil exports are sold to European countries like Italy (523,000 bbl/d), Germany (210,000 bbl/d), Spain (104,000) bbl/d and France (137,000 bbl/d). With the lifting of sanctions against Libya in 2004, the United States has increased its imports of Libyan oil. According to EIA estimates, the United States imported an average of 102,000 bbl/d from Libya in 2008, up from 56,000 bbl/d in 2005.

Libyan oil is generally light (high API gravity) and sweet (low sulfur content). The country's nine export grades have API gravities that range from 26o – 44o. While the lighter, sweeter grades are generally sold to Europe, the heavier crude oils are often exported to Asian markets.

According to OGJ, Libya has five domestic refineries, with a combined capacity of 378,000 bbl/d. Libya's refineries include: 1) the Ras Lanuf export refinery, completed in 1984 and located on the Gulf of Sirte, with a crude oil refining capacity of 220,000 bbl/d; 2) the Az Zawiya refinery, completed in 1974 and located in northwestern Libya, with crude processing capacity of 120,000 bbl/d; 3) the Tobruk refinery, with crude capacity of 20,000 bbl/d; 4) Brega, the oldest refinery in Libya, located near Tobruk with crude capacity of 10,000 bbl/d; and 5) Sarir, a topping facility with 8,000 bbl/d of capacity.

Libya's refining sector reportedly was impacted by UN sanctions, specifically UN Resolution 883 of November 11, 1993, which banned Libya from importing refinery equipment. Libya is seeking a comprehensive upgrade to its entire refining system, with a particular aim of increasing output of gasoline and other light products. In 2009, the NOC and the Trusta Consortium (United Arab Emirates) signed an agreement for upgrades on the Ras Lanuf refinery to expand output to 240,000 bbl/d. NOC is also expected to re-tender an engineering, procurement and construction contract for upgrading the Az Zawiya refinery.

Libya's oil industry is run by the state-owned National Oil Corporation (NOC). The NOC is responsible for implementing the Exploration and Production Sharing Agreements (EPSA) with international oil companies (IOCs), field development and improvements and downstream activities.

IOC participation in Libya’s oil concessions was initially as high as 49 percent. However, recent changes to the production sharing agreements announced by Libya’s Oil and Natural Gas Council are expected to cut IOC oil shares to as low as 20 percent. Some companies have already completed the renegotiation process with others still in the process of agreeing on terms.

In 2009, the Libyan government invested in Eni, an Italian oil company that has been operating in Libya since 1959 and is Libya’s largest foreign oil producer. Through the country’s sovereign wealth funds, Libya has been eyeing additional energy investments in Europe including Cyprus and Ukraine with additional interests in Africa.

Libya also has refinery operations in Europe through its overseas oil retail arm, Tamoil. Through Tamoil, Libya is a direct producer and distributor of refined products in Italy, Germany, Switzerland, and Egypt.