Since the discovery of oil in Libya in 1958, it was paramount to form a body to manage and develop the oil sector in Libya.
National Oil Corporation (NOC) was established on 12 November 1970, under Law No: 24/1970, replacing the general Libyan Petroleum Corporation which established under Law No. 13 of 1968 to assume the responsibility of the oil sector operations. It was later reorganized under decision No :10/1979 by the General Secretariat of the General People’s Congress, to undertake the realization of the objectives of the development plan in the areas of petroleum, supporting the national economy through increasing, developing and exploiting the oil reserves and operating and investing in those reserves, to realize optimum returns. In carrying out its activities, NOC may enter into participation agreements with other companies and corporations carrying out similar activities.
- 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, Texas Gulf, and others, resulting in major oil discoveries by 1959.
- 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. 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 who 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.
Eventually, all the foreign companies (excluding BP) agreed to partial nationalization, providing Libya with a substantial oil surplus. However, declining world oil prices resulted in NOC selling back its production shares. Other concessions that were nationalized that year included those belonging to BP, Amoseas (Beida field), Hunt, Arco, Esso and Shell's 17 percent share in the Oasis Oil Company. Mobil-Gelsenberg was owned by the NOC (51%), Mobil (32%), and Gelsenberg (17%). Overall, during 1976 the National Oil Corporation produced about 408,000 bbl/d (64,900 m3/d) and exported 1.2 mmbpd.