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The ongoing US-Israel war on Iran has triggered a worsening global energy crisis, pushing European nations to search urgently for alternative energy suppliers, trade corridors, and strategic partnerships. In this scramble, countries across North Africa have found their geopolitical and economic value under fresh scrutiny. Algeria has emerged as a particularly strong candidate given its established role as a gas supplier, while Egypt offers refining capacity, existing infrastructure, and access to global markets through the Suez Canal. Libya, too, has seen its strategic importance rise considerably.
According to Mohamed Eljarh, writing in an opinion piece for Al Jazeera, Libya holds approximately 48 billion barrels of proven oil reserves—the largest on the African continent—and currently produces around 1.5 million barrels of oil per day. The country also possesses substantial natural gas reserves. Its crude reaches international markets via the Mediterranean, and the Greenstream pipeline, which links the Mellitah complex directly to Europe, provides a critical gas export route. While Libya cannot replace the Gulf region in terms of overall oil and gas export volumes, it has the potential to become a significant player in global diversification efforts, both for Europe and beyond.
However, the country faces a fundamental challenge: how to capitalize fully on this moment of heightened demand while grappling with deep structural constraints and persistent insecurity. Libya is, paradoxically, both a major energy exporter and an energy-insecure state. Despite its vast hydrocarbon wealth, Libyan citizens endure regular electricity blackouts caused by an inefficient domestic energy system. More than 70 percent of the country's gas production is consumed domestically, primarily for electricity generation, leaving insufficient supply to meet both local needs and export commitments. As a result, gas exports have plummeted year on year, falling from roughly 200 billion cubic feet in 2019 to just 35 billion in 2025—the lowest export levels the country has seen in 22 years.
Compounding this problem, Libya flares at least 200 billion cubic feet of gas annually due to underdeveloped infrastructure. This is gas that could otherwise generate electricity, support industrial development, or boost export revenues. Instead, it is wasted. The International Monetary Fund has estimated Libya's total energy subsidy burden at around $17 billion, equivalent to roughly 35 percent of GDP—one of the largest such burdens in the world. A substantial portion of these funds is directed toward subsidizing imported refined fuels, as domestic refining capacity remains largely underdeveloped and incapable of meeting national demand.
The domestic energy crisis is further aggravated by political fragmentation, institutional disputes, and periodic disruptions to production caused by conflict. These factors create a precarious operating environment for energy companies and undermine the country's ability to manage its resources effectively. Eljarh argues that increasing exports without addressing these underlying problems risks improving energy security abroad while neglecting it at home—a recipe for deeper instability in an already fragile nation.
The global energy crisis sparked by the Iran war undoubtedly presents Libya with a major opportunity to increase hydrocarbon revenues. Yet it also carries significant risk. Eljarh, speaking from his participation in the 5th meeting of the Mediterranean Energy Experts Circle earlier this month, warns that greater demand for Libyan oil and gas could reinforce the very economic model the country has struggled to escape for decades: producing hydrocarbons, exporting them, distributing the revenues, and postponing structural reform. This pattern traps the Libyan state in the familiar "resource curse," which fosters economic stagnation and inefficiency rather than sustainable development.
To avoid this trap, Libya must use the proceeds from heightened energy demand to transform its energy system. That means capturing flared gas, modernizing electricity generation and transmission networks, expanding domestic refining where economically viable, reforming subsidies, investing seriously in renewable energy, and participating in sustainable regional energy cooperation. Libya's National Sustainable Energy Strategy aims to have 22 percent of electricity generation come from renewable sources by 2035—an ambitious target that requires major improvements in security and governance conditions. Increased revenue flows could help jump-start that process.
Another crucial consideration is how Libya should approach heightened foreign interest in its energy sector. The country's first major oil and gas licensing round since 2007 was concluded in February, with major international companies—including the United States' Chevron, Italy's Eni, QatarEnergy, Spain's Repsol, Hungary's MOL, Nigeria's Aiteo, and Türkiye's TPAO—securing new licenses. Commercial and geopolitical interests are rarely fully separate in the energy sector, and for Libya, this dynamic creates bargaining power—but only if managed coherently by Libyan authorities. Rather than allowing the country to become an arena where external actors compete for individual assets and relationships, Libya could leverage diversified partnerships to attract investment and technology while reducing its dependence on any single partner.
Beyond its borders, Libya's transformation should aim to make it an integral player in a broader Mediterranean energy hub. By expanding cooperation with neighboring states and leveraging existing production capacities and infrastructure, Libya could position itself as a central node in regional energy networks. To its east, Egypt possesses a large electricity system and significant refining and processing capacity. To its west, Tunisia provides access toward the wider Maghreb region and increasingly toward European markets. Libya sits between them with enormous hydrocarbon resources, considerable solar potential, and existing energy connections with both neighbors.
Important steps have already been taken to deepen regional energy integration. In January, Egypt and Libya signed an energy cooperation agreement covering exploration and the development of crude-oil refining. The two countries are also discussing further collaboration. These initiatives suggest that Libya's path forward may lie not in isolation but in strategic partnership—using its geographic position and resource base to anchor a more integrated and resilient Mediterranean energy landscape. Whether Libya seizes this opportunity or falls deeper into the trap of its longstanding resource curse will depend on the decisions made in the coming months and years.
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