Al-Hdhiri Writes: “The NOC’s Loan Request to Increase Production Capacity and the Recurring Illusions”

The legal expert in the oil sector, Othman Al-Hdhiri, wrote an article in which he said:

I read an article by a colleague interested in economics and finance discussing an anticipated loan for the National Oil Corporation, asking whether it is a necessary support for developing production or just another financial burden. He also seemed to believe—rather optimistically—that the proposed loan could bring about a qualitative leap in Libya’s oil sector. However, he avoided addressing several fundamental points that are central to evaluating such a sensitive step. Therefore, I saw it appropriate to respond as follows:

Despite the validity of the argument that financing is important to complete stalled projects, presenting the matter from a single angle—without addressing the structural issues hindering Libya’s oil sector, whether administrative, political, or regulatory—results in an incomplete argument.

First: The absence of figures and technical details

For example: the size of the requested loan, the cost of the related projects, the expected return from each project, and the timeline for executing the plans.
This deficiency makes the evaluation closer to impressions than precise economic analysis.

Second: Ignoring the current management’s track record

A realistic review of the Corporation’s performance in managing previous funding, exceptional budgets, and major projects is essential in assessing its capacity to invest the loan “objectively and responsibly.” Financial success is not only tied to having money, but to using it efficiently, ensuring transparent contracting, maintaining sound governance systems, and assessing whether the current management of the Corporation and its subsidiaries can employ the funds scientifically and economically.

Third: The missing political dimension

Libya’s oil sector is not purely technical; it is directly affected by political division, shifting power centers, repeated shutdowns, interventions outside the institutional framework, and the financial ambitions driven each day by tribal and regional connections.

Combined, these factors can render any new financial commitment vulnerable to obstruction or theft at any moment — an aspect often overlooked in many discussions.

Fourth: Would recommending the loan be positive?

In principle, providing the Corporation with funding is a correct and necessary step. But its benefits depend on clear conditions, including:
Accurate identification of project priorities, ensuring independent financial oversight, preventing the use of the loan for operational expenses, and publishing periodic reports on spending and implementation progress.

Without these safeguards, the loan may become another financial burden added to the state’s crises rather than a lever for production.

Fifth: Potential points of failure

Even if the loan is secured, key concerns remain:
The potential misuse of funds amid weak oversight, inflated administrative expenses at the expense of productive projects, the waste of part of the loan due to political interference, and the risk of shutdowns or instability disrupting production and hindering repayment. Based on previous experience—where an exceptional budget exceeding 52 billion dinars was squandered without achieving any return, neither in increased production nor in improving fields or workers’ conditions—the risks are considerable.

In conclusion:
The loan is not a problem in itself, nor is it a magical solution. Its success depends on a stable institutional environment, competent management, and transparent oversight mechanisms.

Unless the root governance failures within the sector are addressed, injecting money—regardless of its size—may not achieve the expected increase in production and may instead add new financial burdens to a sector already suffering from deepening and accumulating bottlenecks.

Accordingly, lenders—whether the state, commercial banks, or the foreign bank—must take these considerations into account before embarking on yet another experience destined for repeated failure.