Libya risks energy crisis amid $1 billion in unpaid fuel debts

Libya has accumulated around $1 billion in unpaid dues to its fuel suppliers after ending a controversial oil barter system three months ago, Bloomberg reports.

The state-run National Oil Corp. (NOC) used to rely on a crude-for-fuel swap arrangement to cover its energy needs. Libya holds the largest proven oil reserves in Africa but it doesn’t have the refining infrastructure to turn it into fuel. As a result, it relies on fuel imports. It traditionally paid for that fuel not with cash but with oil from Libya.

But that program ended recently following criticism from Libya’s audit bureau over inefficiencies.

Sources told Bloomberg Libya now faces the risk of tripling its arrears by year-end unless it clears its debts.

The NOC’s inability to pay threatens the availability of essential fuels like gasoline in a country facing political unrest and economic fragmentation.

The NOC cannot directly use crude revenues for fuel purchases, as these funds must go through the central bank, which is contested by Libya’s rival governments.

In a letter, the NOC urged the government to release funds through letters of credit and warned that failure to act could cripple services like power generation and transport.