Note this document should not be considered as expert advice  – where applicable legal opinion should be sought

Overview

In early 2025, Libya’s state-run National Oil Corporation (NOC) launched a new international licensing round for oil and gas exploration—the country’s first such bid round since 2008.

The move aims to attract major foreign energy firms and revive exploration across Libya’s vast underexplored basins. Below is a detailed breakdown of key aspects of this bidding round, covering eligibility requirements, the bidding process, the legal framework, financial terms, and the broader strategic implications for Libya’s oil sector and economy.

Eligibility Requirements

Libya is inviting international oil companies (IOCs), particularly established firms with strong financial standing and advanced technical expertise, to participate in the bid round.

The eligibility criteria likely include:

  • Technical Capacity: Demonstrated experience in upstream oil and gas projects (exploration, drilling, development), including the technology to operate in challenging environments (e.g., deep offshore or enhanced oil recovery in mature fields). The NOC chairman explicitly sought “leading global companies with the advanced technologies and capabilities” needed to meet Libya’s strategic production goals. This implies that bidders should have a proven track record in discovering and developing oil and gas reserves, as well as expertise in Libyan geology.
  • Financial Strength: Companies must demonstrate sufficient financial resources and capitalization to undertake multi-year exploration programs in Libya. This typically involves submitting financial statements to show the ability to invest potentially hundreds of millions in exploration and field development. Libya’s oil officials have noted that the sector requires billions in investment to boost output, so bidders must convincingly prove they can fund the required work. A minimum net worth or assets threshold is usually applied, and bidders may need to provide bank guarantees or credit references as part of pre-qualification.
  • Operational and HSE Track Record: Firms are expected to have a solid record of safe operations and environmental stewardship. Given Libya’s emphasis on modernizing its oil industry, participants should have strong health, safety, and environmental (HSE) performance. Compliance with international and Libyan regulations is mandatory, and companies under international sanctions or legal restrictions (e.g., U.N. sanctions compliance) would likely be disqualified.
  • Pre-qualification Documentation: Interested companies must pre-qualify with Libyan authorities. This usually involves submitting an application package, including corporate information, financial records (annual reports, balance sheets), technical resumes (description of past projects, key personnel CVs), and HSE policies. The Ministry of Oil and Gas (MOO) and NOC will review these submissions to ensure bidders meet the eligibility criteria.

In previous Libyan rounds, companies had to apply by a set deadline and were vetted on technical and financial grounds before being admitted to bid. For the 2025 round, reports indicate a rapid turnaround—the acting Oil Minister said the bid round was ready to launch pending government approval in January, and pre-qualification likely opened immediately after the March announcement. The deadline for submitting pre-qualification documents was reportedly within a week or two of the launch. Only those consortia approved through this process can proceed to bid.

Bidding Process

The bidding process is designed to be transparent and competitive, following a structured sequence overseen by the NOC and the Oil Ministry. Key steps include:

  • Announcement and Data Release: The NOC formally announces the licensing round and publishes information on the available exploration areas (blocks). In the 2025 round, officials indicated that 15 to 22 blocks across all major basins (Sirte, Murzuq, Ghadames, and offshore Mediterranean) would be on offer. A launch event was held in Tripoli with the Prime Minister and Oil Minister, signaling high-level support.

    Shortly after the announcement, the NOC typically makes available a data package for each block, including geological surveys, seismic data, well logs, and a model contract. Data rooms are opened for qualified bidders to review technical data. In previous rounds, NOC invited pre-qualified companies to review complete bid packages, which included instructions, geological data, the model Exploration and Production Sharing Agreement (EPSA), a required work program, and a bid guarantee form. A fee is usually charged for data access (e.g., in 2006, “mandatory data room access fees” were announced during the technical presentation).

  • Pre-Qualification: As noted, companies must submit pre-qualification applications to demonstrate they meet Libya’s requirements. The 2025 pre-qualification period appears to have been very short, likely due to prior informal interest and Libya’s urgency. In previous rounds, companies had 2–3 weeks to apply, after which the NOC notified qualified applicants. For 2025, it is expected that within days of the launch, interested firms had to submit their credentials to the MOO/NOC for approval. The MOO reserves the right to accept or reject applicants at its sole discretion, ensuring only reputable and capable firms enter the bidding. Once the MOO/NOC publishes the list of pre-qualified bidders, only these entities (or consortia) can submit offers on blocks.
  • Bid Submission: After data review and pre-qualification, the NOC will set a deadline for submission of bids. Bids are typically submitted as sealed proposals, often in person in Tripoli. Past Libyan licensing rounds used sealed bidding, where companies hand-delivered sealed bid envelopes on the designated bid opening day. Each bid package usually includes the bidder’s proposed terms (such as the percentage of production they are offering to the state), a commitment to the minimum work (e.g., number of wells to drill, seismic lines to shoot), and any required bid bond/guarantee.

    For the 2025 round, specific deadlines have not been publicly reported yet, but officials signaled an aggressive timeline to maintain momentum, possibly targeting bid submission and opening within a few months of the announcement (mid-to-late 2025). Required documentation likely includes a signed commitment to the model contract terms, financial bid parameters, a work program plan, and a bid bond (a bank guarantee to ensure the bid is serious).

  • Public Bid Opening & Evaluation: Libya emphasizes transparency in bid evaluation. In previous rounds, the NOC held a public bid opening ceremony where all sealed bids were opened in front of company representatives and observers. Each bid’s key financial terms were read aloud, allowing immediate comparison. Winners were announced at the end of the session for each block.

    A similar process is expected in 2025 to bolster investor confidence in fairness. Bid evaluation is primarily based on the offered economic terms under the production-sharing formula. In Libya’s EPSA system, a key biddable term is often the share of “profit oil” that the company is willing to give to the state—essentially, how much of the production the IOC will allocate to NOC after recovering its costs. The lower the contractor’s share (and thus the higher the state/NOC share), the more competitive the bid. This was the core selection criterion in earlier EPSA bid rounds, with winning firms in previous rounds accepting as little as 10–20% of net production, while NOC took 80–90%. Similar high state-take offers are expected now.

    Bids might also be evaluated based on signature bonuses (one-time cash payments) if requested, and on the robustness of the proposed work program (e.g., committing to drill a higher number of wells could be a tiebreaker if financial offers are close). The NOC will likely have a predetermined formula to score bids. Once the winners are declared publicly, the NOC and the successful bidders will proceed to contract finalisation.

 

Legal & Regulatory Framework

Libya’s oil exploration activities operate within a structured legal framework designed to ensure state control, transparency, and alignment with national interests.

Petroleum Law and Exploration Rights

The foundation of Libya’s petroleum sector is Petroleum Law No. 25 of 1955, which, despite amendments, remains the legal basis for all petroleum operations. Under this law, all hydrocarbon resources belong to the state, and exploration and production activities are subject to government authorization.

The law introduced a concession-based system to encourage investment while preventing monopolization. Over time, Libya transitioned from early concession agreements, which granted broad rights to International Oil Companies (IOCs), to Exploration and Production Sharing Agreements (EPSAs)—Libya’s version of production-sharing contracts (PSCs). Under EPSAs, foreign operators do not own oil reserves but receive rights to explore and share production based on contractual terms. Any foreign entity seeking to explore or produce hydrocarbons must obtain an official permit, license, or EPSA contract with the state.

Government Oversight and Key Institutions

Libya’s oil sector is overseen by several regulatory bodies:

  • National Oil Corporation (NOC): Established by Law No. 24 of 1970, NOC serves as Libya’s central petroleum authority, managing all oil contracts and partnerships. Foreign companies can only operate in Libya by partnering with NOC through EPSAs.
  • Ministry of Oil and Gas (MOO): Responsible for policy formulation and regulatory oversight.
  • Cabinet of the Government of National Unity: Approves licensing rounds and contract awards.
  • Petroleum Committee (within MOO): Reviews bid outcomes and recommends awards for government endorsement.

Despite political divisions, Libya’s oil laws and NOC’s authority apply nationwide, ensuring operational continuity across different regions.

EPSA Contract Model

Libya’s EPSA agreements, particularly the EPSA-IV model (introduced in the mid-2000s), have unique characteristics:

  • Foreign operators bear full exploration risk and cost—if no discovery is made, they receive no compensation.
  • Production is shared from the outset, with NOC typically receiving 80% or more of the profit oil.
  • Cost recovery limits define the portion of production allocated for recouping investment expenses.
  • Legal obligations include taxation, state participation, and domestic supply commitments.
  • Standardized contract models ensure consistency, with key terms fixed and non-negotiable.

Environmental and Regulatory Compliance

Libya enforces strict environmental and safety regulations:

  • Petroleum Law No. 25 of 1955 and Environment Law No. 15 of 2003 establish environmental safeguards.
  • Operators must conduct Environmental Impact Assessments (EIAs) before major activities such as drilling.
  • Compliance is monitored by the Environment General Authority, working alongside NOC.
  • Libya adheres to international Health, Safety, and Environmental (HSE) standards, with policies aimed at reducing gas flaring and ensuring sustainable operations.

The legal framework ensures state control over resources while integrating modern regulatory practices to enhance transparency and environmental responsibility.

 

Financial Commitments for Bidders

Companies participating in Libya’s licensing round must be prepared for substantial financial commitments, including:

Upfront Fees and Financial Guarantees

  • Signature Fees and Bonuses: Bidders may be required to pay entry fees, data package fees, and signature bonuses upon contract award.
  • Bid Bonds: A financial guarantee submitted with bids, typically in the range of a few million dollars, which is forfeited if the bidder fails to finalize the contract.
  • Performance Bonds: Replace bid bonds upon contract signing and ensure commitment to work obligations.

Production Sharing & Royalties

  • No traditional royalty—Libya uses a production-sharing mechanism where contractors recover costs from “cost oil”, and the remainder (“profit oil”) is divided between NOC and the contractor.
  • Libya’s state share of profit oil is high, often exceeding 80%.
  • Bidders propose their profit split, with the most state-favorable offer increasing chances of winning a block.
  • Income tax obligations apply to the contractor’s share of profit oil, as defined by Libyan tax law.

Work Obligations & Cost Recovery

  • Exploration investments can reach tens of millions of dollars per block, covering seismic surveys and drilling commitments.
  • Cost recovery limits apply, meaning only a portion of production can be allocated to recoup expenses annually.
  • Minimum Work Programs include seismic data acquisition and well drilling, with penalties for unfulfilled commitments.

State Participation and Financial Structuring

  • NOC often retains a working interest (e.g., 50%) in commercial discoveries, sharing development costs.
  • Foreign operators fully fund exploration, while NOC co-invests during the development phase.
  • Training and social development contributions are mandated under EPSA terms.

Libya’s licensing structure balances investor incentives with state control, ensuring that exploration risks are borne by private entities while maximizing national benefits from successful discoveries.

 

Exploration & Development Phases for Winners

Successful bidders must adhere to a structured process:

Exploration Phase

  • Typically spans five years, divided into multiple phases.
  • Involves geological studies, seismic surveys, and exploratory drilling.
  • Operators must progressively relinquish unused acreage to the state.

Discovery and Appraisal

  • If hydrocarbons are found, companies enter an appraisal period to assess commercial viability.
  • Appraisal includes additional drilling and reservoir testing.

Development and Production

  • Upon declaring a commercial discovery, companies submit a Field Development Plan (FDP) for government approval.
  • Development may last 20–25 years, with infrastructure investments such as wells, pipelines, and processing facilities.
  • Production-sharing terms apply, and operations are jointly managed with NOC.
  • Companies must comply with local workforce training and environmental obligations.

At the end of the contract term, all assets transfer to the Libyan state, ensuring long-term national benefit from oil and gas resources.

 

Strategic Implications of the Bid Round

The relaunch of oil exploration bidding after 17 years carries profound economic and geopolitical implications for Libya:

Economic Revitalization

  • Oil revenues constitute ~95% of government income—new projects will inject billions into the economy.
  • Job creation across multiple sectors, including oilfield services, logistics, and infrastructure.
  • Strengthening of the Libyan dinar and foreign exchange reserves.

Oil & Gas Production Growth

  • Libya aims to increase production to 2 million barrels per day (bpd) from the current 1.4–1.5 million bpd.
  • New exploration is critical to offset natural declines and add proven reserves.
  • Gas development could enhance Libya’s position as a supplier to Europe, complementing existing deals like Eni’s $8 billion gas project.

Foreign Investment and Stability

  • Attracting IOCs signals Libya’s return as a key oil player.
  • High-profile participation boosts investor confidence and geopolitical stability.
  • A successful bid round strengthens Libya’s diplomatic ties with energy-importing nations.

Challenges and Risk Mitigation

  • Political uncertainties remain—ensuring legal clarity and enforcement of contracts is crucial.
  • Regional balance in block allocation aims to promote unity and prevent conflicts over oil wealth.
  • Environmental modernization efforts align Libya with international sustainability initiatives.

This bid round is a cornerstone of Libya’s strategy to modernize its oil sector, attract investment, and secure long-term economic stability while positioning itself as a reliable energy partner on the global stage.

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